Why is credit risk modeling more difficult than interest-rate modeling?
Answer to relevant QuestionsHow does the Jarrow-Turnbull-Lando model differ from the basic Jarrow-Turnbull model? What would be a suitable metric to assess credit risk on a relative basis when making a relative value decision? Explain how the Black-Scholes-Merton model has been extended to overcome the assumption that default can only occur at maturity. What are the limitations of using duration and convexity measures in active portfolio strategies? The following excerpt comes from an article titled “Securities Counselors Eyes Cutting Duration” in the February 17, 1992, issue of BondWeek, p. 5: “Securities Counselors of Iowa will shorten the 5.3 year duration on ...
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