Pricing of Defaultable Bonds with Log-Normal Spread: Development of the Model and an Application to Argentinean and Brazilian Bonds During the Argentine Crisis期刊界 All Journals 搜尽天下杂志传播学术成果专业期刊搜索期刊信息化学术搜索

Pricing of Defaultable Bonds with Log-Normal Spread: Development of the Model and an Application to Argentinean and Brazilian Bonds During the Argentine Crisis

Authors:	Mariano?Cané?De?Estrada,Elsa?Cortina author-information" > author-information__contact u-icon-before" > mailto:elsa_iam@fibertel.com.ar" title=" elsa_iam@fibertel.com.ar" itemprop=" email" data-track=" click" data-track-action=" Email author" data-track-label=" " >Email author,Constantino?Ferro?Fontán,Javier?Di?Fiori

Affiliation:	(1) Superintendencia de AFJP, Tucumán 500, (1049) Buenos Aires, Argentina;(2) Instituto Argentino de Matemática (CONICET), Saavedra 15, 3er. piso, (1083) Buenos Aires, Argentina;(3) Instituto de Física del Plasma (CONICET), Facultad de Ciencias Exactas y Naturales, Universidad de Buenos Aires, Ciudad Universitaria, Pabellón 1, (1428) Buenos Aires, Argentina;(4) Universidad de San Andrés, Vito Dumas 284, 1644 Victoria, Buenos Aires, Argentina

Abstract:	In this paper we describe a two-factor model for a defaultable discount bond, assuming log-normal dynamics with bounded volatility for the instantaneous short rate spread. Under some simplified hypothesis, we obtain an explicit barrier-type solution for zero recovery and constant recovery. We also present a numerical application for Argentinean and Brazilian Sovereign Bonds during the default crisis of Argentina.JEL Classification: G 13

Keywords:	credit risk defaultable bonds log-normal spread
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