| Summary: | 碩士 === 國立交通大學 === 財務金融研究所 === 98 === After the worldwide financial crisis in 2007, credit risk of the company is getting vast attention not only from academic but also from people in practice. Specifically, many firms had good rating but suddenly default during the financial crisis. Hence, how to accurately model the default risk of the firm is a much more important issue nowadays.
In this paper, we develop a more efficient numerical simulation method to value the corporate risky bond. Our model employs the structural approach for valuing corporate bonds under the double exponential jump diffusion process (Kou 2002). This approach has more flexibility in matching the empirical data than previous models. In addition, to make our model more realistic, we adopt the caution time setting, which is parallel to the Parisian option in option pricing, to model the bond safety covenant.
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