Structural Credit Risk Models: Endogenous versus Exogenous Default

29 Pages Posted: 16 Sep 2012  

Michael B. Imerman

Lehigh University; Princeton University

Date Written: January 25, 2012

Abstract

This article reviews structural credit risk models. Special emphasis is on the distinction between endogenous default versus exogenous default and the economic implications of the different assumptions. It is argued that models with endogenous default provide more insight into the default process. On the other hand, assuming exogenous default gives the flexibility to include certain features that are observed in actual credit markets.

Keywords: Structural credit risk models, Default probability, Bond pricing, Credit spreads

JEL Classification: G00, G12, G33

Suggested Citation

Imerman, Michael B., Structural Credit Risk Models: Endogenous versus Exogenous Default (January 25, 2012). Available at SSRN: https://ssrn.com/abstract=2146780 or http://dx.doi.org/10.2139/ssrn.2146780

Michael B. Imerman (Contact Author)

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-6380 (Phone)

Princeton University ( email )

Sherrerd Hall
Princeton, NJ 08544
United States
609-258-1889 (Phone)

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