Le, Anh - In: Quarterly Journal of Finance (QJF) 05 (2015) 01, pp. 1550005-1
In this paper, I propose a general pricing framework that allows the risk neutral dynamics of loss given default (Lℚ) and default probabilities (λℚ) to be separately and sequentially discovered. The key is to exploit the differentials in Lℚ exhibited by different securities on the same...