Fu, Jianping; Wang, Xingchun; Wang, Yongjin - In: Computational Management Science 9 (2012) 4, pp. 515-530
In this paper, we consider a bond valuation model with both credit risk and liquidity risk to show that credit spreads are not negligible for short maturities. We adopt the structural approach to model credit risk, where the default triggering barrier is determined endogenously by maximizing...