Mjøs, Aksel; Persson, Svein-Arne - In: Journal of Financial and Quantitative Analysis 45 (2010) 05, pp. 1311-1339
Motivated by the effect on valuation of stopped or reduced debt coupon payments from a company in financial distress, we value a level-dependent annuity contract where the annuity rate depends on the value of an underlying asset process. The range of possible values of this asset is divided into...