This article presents, estimates and tests a credit default swap (CDS) pricing model, which links a firm's default intensity to its observed stock price. The pricing model requires finite difference numerical solutions. In spite of this quasi-maximum likelihood parameter estimation is still...

This article presents a tractable structural model in which default may be both expected or unexpected. The model can predict realistically high short-term credit spreads. Closed form solutions are provided for corporate bonds and default swaps. The analysis suggests that, in order for the...