1 March 1994Financial Analysts JournalVolume 50, Issue 2
A Trinomial Model of Bonds with Default Risk
Frank S. Skinner
Default risk can be modeled as an evolution of a series of events, rather than a binomial occurrence of default or no default. This insight results in a simple trinomial model for bonds with default risk that incorporates four major factors that influence the price of corporate debt. These four factors are the possibility of a rating change, recovery in the event of default, changes in the time to maturity and movements in the underlying term structure.
Read the Complete Article in Financial Analysts Journal
Financial Analysts Journal
CFA Institute Member ContentPublisher Information
Association for Investment Management and Research
6 pages doi.org/10.2469/faj.v50.n2.73ISSN/ISBN: 0015-198X
Functional cookies, which are necessary for basic site functionality like keeping you logged in, are always enabled.