Hung, Ken; Duan, Chang-Wen; Yang, Chin W. - In: Annals of Economics and Finance 7 (2006) 2, pp. 405-424
This paper focuses on evaluating the credit risk of corporate bond in the fixed income market of Taiwan. We apply Vasicek (1977) model into Merton's (1974) option framework and obtain a closed-form solution of the options model. The solution algorithm employs the Newton-Raphson method in...