Building the Model

15 Pages Posted: 28 Aug 2015

Date Written: August 26, 2015

Abstract

This paper introduces an advanced structural credit risk model. It is built upon the Black-Cox model with the addition of a jump-diffusion driving process, a dynamic capital structure that targets an optimal gearing, a flexible liability maturity structure, a multi-rate tax regime treating government as a stakeholder, and an endogenously calculated default barrier.

Keywords: structural model, capital structure, credit risk

JEL Classification: G12, G13, G32, G33

Suggested Citation

Buellesbach, Joe, Building the Model (August 26, 2015). Available at SSRN: https://ssrn.com/abstract=2651148 or http://dx.doi.org/10.2139/ssrn.2651148

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