Chang, Bo Young; Orosi, Greg - 2020 - Last updated: April 20, 2020
option prices. Building on the idea of a default corridor proposed in Carr and Wu (2011), we derive a parsimonious closed …-form formula for American put option prices from which the probability of default can be inferred. The proposed method is easy to …-out-of-the-money put option. Our empirical results are based on seven large U.S. firms for the period 2002 to 2010. These results show that …