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Structural and reduced-form models are two well-established approaches to modelling a firm’s default risk. Here, Li Chen, Damir Filipovic and Vincent Poor develop a new default risk modelling strategy based on combining these two frameworks in order to overcome the weaknesses of each. The novelty of this model lies in its explicit and tractable structure. Empirical testing further shows that the proposed mixed model significantly outperforms the structural and reduced-form models in fitting cross-sectional bond yield curves
Type
report
Authors
Publication date
2004
Note
RISK, 17, November 2004
EPFL units
Available on Infoscience
August 13, 2013
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