We propose a numerical method to price corporate bonds based on the model of default risk developed by Madan and Unal. Using a perturbation approach, we derive two semi-explicit formulae that allow us to approximate the survival probability of the firm issuing the bond very efficiently. More...

We propose a new model to price defaultable bonds which incorporates features of both structural and reduced-form models of credit risk. The main novelty of the model is that the default intensity is described by an additional stochastic differential equation coupled with the process of the...