Kim, Mi Ae; Jang, Bong-Gyu; Lee, Ho-Seok - In: Journal of Banking & Finance 32 (2008) 12, pp. 2617-2627
In this paper, we suggest a first-passage-time model which can explain default probability and default correlation dynamics under stochastic market environment. We add a Markov regime-switching market condition to the first-passage-time model of Zhou [Zhou, C., 2001. An analysis of default...