This article provides a generalized two-firm model of default correlation, based on the structural approach that incorporates interest rate risk. In most structural models default is driven by the firms' asset dynamics. In this article, a two-firm model of default is instead driven by the...

The paper describes a continuous time share market model with a minimal number of factors. These factors are powers of Bessel processes. The asset prices are formed by ratios of the factors and have consequently leptokurtic return distributions. In this framework stochastic volatility with...

We extend the credit risk valuation framework introduced by Gatfaoui (2003) to stochastic volatility models. We state a general setting for valuing risky debt in the light of systematic risk and idiosyncratic risk, which are known to affect each risky asset in the financial market. The option...