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The new structural model of credit risk based on a normal firm value diffusion process can infer the firm value volatility from bank credit spreads that closely agreeing with the empirically estimated firm value volatility. We use the spread-implied firm value volatility as the model volatility...
Persistent link: https://www.econbiz.de/10012969039
We derive the formulas for pricing corporate liabilities using a normal and a lognormal firm value diffusion process (FVDP). So far well-known structural firm models have only allowed positive firm values, but real firm value can be negative because a firm can incur losses beyond its ability to...
Persistent link: https://www.econbiz.de/10012903570