Abstract

http://ssrn.com/abstract=1327437
 
 

References (40)



 
 

Citations (9)



 


 



Modeling the Recovery Rate in a Reduced Form Model


Xin Guo


University of California, Berkeley

Robert A. Jarrow


affiliation not provided to SSRN

Yan Zeng


affiliation not provided to SSRN

2007-08

Mathematical Finance, Vol. 19, Issue 1, pp. 73-97, January 2009

Abstract:     
This paper provides a model for the recovery rate process in a reduced form model. After default, a firm continues to operate, and the recovery rate is determined by the value of the firm's assets relative to its liabilities. The debt recovers a different magnitude depending upon whether or not the firm enters insolvency and bankruptcy. Although this recovery rate process is similar to that used in a structural model, the reduced form approach is maintained by utilizing information reduction in the sense of Guo, Jarrow, and Zeng. Our model is able to provide analytic expressions for a firm's default intensity, bankruptcy intensity, and zero-coupon bond prices both before and after default.

Number of Pages in PDF File: 25

Accepted Paper Series


Date posted: January 17, 2009  

Suggested Citation

Guo, Xin and Jarrow, Robert A. and Zeng, Yan, Modeling the Recovery Rate in a Reduced Form Model (2007-08). Mathematical Finance, Vol. 19, Issue 1, pp. 73-97, January 2009. Available at SSRN: http://ssrn.com/abstract=1327437 or http://dx.doi.org/10.1111/j.1467-9965.2008.00358.x

Contact Information

Xin Guo
University of California, Berkeley
310 Barrows Hall
Berkeley, CA 94720
United States
Robert A. Jarrow
affiliation not provided to SSRN
Yan Zeng
affiliation not provided to SSRN ( email )
Feedback to SSRN


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References:  40
Citations:  9

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