Valuation of Zero Coupon Bonds with Credit Rating Migration Risk

doi:10.11908/j.issn.0253-374x.2015.08.025

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Valuation of Zero Coupon Bonds with Credit Rating Migration Risk
DOI:
                        10.11908/j.issn.0253-374x.2015.08.025
                    
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                        LIANG JinLIANG Jin
Department of Mathematics, Tongji University, Shanghai 200092, China
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Clc Number:F830
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Abstract:

A model was established to price of a zero coupon bond whose issuer has credit rating migration risk. A problem of partial differential equations with terminal conditions was obtained by using the reduced form approach. The explicit solution of the bond price in each credit rating and their relations were obtained under some further constant parameter assumptions. Numerical results were shown by graphs with analyses of sensitive factors.

Key words:credit rating migration; zero coupon bond; reduced form approach; intensity model; partial differential equation system

Reference

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LIANG Jin. Valuation of Zero Coupon Bonds with Credit Rating Migration Risk[J].同济大学学报(自然科学版),2015,43(8):1284~1288

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Received:June 30,2014
Revised:May 03,2015
Adopted:April 13,2015
Online: August 07,2015
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