BFS 2002

Contributed Talk

Modeling Credit Risk with Partial Information

Yildiray Yildirim, Umut Cetin, Robert Jarrow, Philip Protter

This paper provides an alternative approach to Duffie and Lando [6] for obtaining a reduced form credit risk model from a structural model. Our model provides an explicit formula for the default intensity based on an Azema martingale, and we use excursion theory of Brownian motions to price risky debt.