Can you price a corporate bond issued by the reference entity of the following features: face value of 100, …xed coupon rate of 7% paid quarterly, maturity of 6 years? Let us assume the default recovery of the bond is 40% of its face value. Show you work and result in a separate worksheet. It takes a bit research and imagination to …nish your assignment. A bit hint: the price of the bond is the present values of its all expected future cash owes: coupons and principal in case of non-default and recovery payment in default. What you need to do is simply attach the appropriate probabilities to each of them.
which type of model, structural or reduced form, should be more accurate in terms of pricing credit securities?

Answer rating: 100% (QA)

The three most important factors for modeling credit risk are expected exposure to default recovery rate and loss given to default These factors allow us to calculate the credit rating adjustment whic... View the full answer