Jarrow, Robert A; Lando, David; Turnbull, Stuart M - In: Review of Financial Studies 10 (1997) 2, pp. 481-523
This article provides a Markov model for the term structure of credit risk spreads. The model is based on Jarrow and Turnbull (1995), with the bankruptcy process following a discrete state space Markov chain in credit ratings. The parameters of this process are easily estimated using observable...