This paper provides a closed-form density approximation when the underlying state variable is a one-dimensional diffusion. Building on Aït-Sahalia (2002), we show that our refinement is applicable under a wide class of drift and diffusion functions. In addition, it facilitates the maximum...

This paper proposes and empirically investigates a family of credit risk models driven by a two-factor structure for the short interest rate and an additional factor for firm-specific distress. The firm-specific distress factors include leverage, book-to-market, profitability, equity-volatility,...