We investigate the performance of a default risk model based on the barrier option framework with maximum likelihood estimation. We provide empirical validation of the model by showing that implied default barriers are statistically significant for a sample of construction firms in Taiwan over...

Recent research has established the existence of log-periodic power law (LPPL) patterns in financial institutions’ credit default swap (CDS) spreads. The main purpose of this paper is to clarify why credit risk markets are predestined for exhibiting LPPL structures. To this end, the credit...