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...

The asymmetric nature of the volatility response to return shocks could simply reflect the existence of time-varying risk premiums. This study proposes a stochastic volatility process allowing for time-varying correlation with underlying returns, in which the market price of volatility risk is...