Structural models of credit risk are known to present both vanishing spreads at very short maturities and a poor spread fit over longer maturities. The former shortcoming, which is due to the diffusive behaviour assumed for asset values, can be circumvented by considering discontinuous asset...

This paper examines a new model of credit risk measurement, the Variance Gamma- Merton one, which seems to be adequate for describing single default occurrence and default correlation in turbulent times. It is based on the notion of business time. Business time runs faster than calendar time...

The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a single model and the alternatives, consistent with the...