Credit Risk and Credit Derivatives by Edu Pristine

Author of lecture Credit Risk and Credit Derivatives

Edu Pristine

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... senior and subordinated debt using a contingent claim approach. Explain, from a contingent claim perspective, the impact stochastic interest rates have on the valuation of risky bonds, equity, and the risk of default. Assess the ...

... risk in risk management programs are: - 1.Assessing the potential of default by debt claimants. ...

... one liability claim and it does not pay any dividends. The financial markets are perfect i.e. there are no taxes and no transaction costs. The construction of model is as follows: -The firm has only one debt issue which is a zero ...

... the VT > F, then the debt holders will receive F. At the time of maturity, if the VT < F, then the debt holders will receive VT and their payoff will be ...

... of the firm's equity at T, given that the face value of the zero coupon bond is $40 ...

... and the total value of the firm is at time T is $30 million. Also, what will be ...

... Black Scholes option pricing model can be modified to determine the value of equity prior ...

... bond σ = volatility of the firm value r = annual interest rate N(d) = cumulative normal distribution function ...

... debt minus the put option on the firm. 2.Firm value minus equity value. Factors affecting the value of equity and value of debt. Value of equity is an increasing function of firm value, ...

... $45 million, principal amount due in 3 years is $30 million. The annual risk free ...

... the firm's debt as a portfolio of risk free debt and short position in put option with the exercise price as the ...