Houweling, Patrick; Vorst, Ton; Mentink, A.A. - Faculteit der Economische Wetenschappen, Erasmus … - 2003
We value rating-triggered step-up bonds with three methods: (i) the Jarrow, Lando and Turnbull (1997, JLT) framework, (ii) a similar framework using historical probabilities and (iii) as plain vanilla bonds. We find that the market seems to value single step-up bonds according to the JLT model,...