Europe CDS indexes. The option-implied correlation is suggested as a measure of the spillover effect of default risk between … prices. The sovereign default risk, funding liquidity risk, level of risk aversion, and equity market performance are …

This article provides a generalized two-firm model of default correlation, based on the structural approach that … incorporates interest rate risk. In most structural models default is driven by the firms' asset dynamics. In this article, a two …-firm model of default is instead driven by the dynamic leverage ratios, which combines the measure of risks of the firms' total …

This paper develops a valuation model of European options incorporating a stochastic default barrier, which extends a … constant default barrier proposed in the Hull-White model. The default barrier is considered as an option writer's liability … stochastic default barriers on option values. The numerical results show that negative correlation between the firm values and …

This paper presents a benchmarking model for validation of default probabilities of listed companies for Basel II … ratings and one-year default probabilities are assigned to companies by mapping the term structures of default probabilities … of the companies generated by a structural model based on stochastic leverage ratios to the term structures of default …