Purpose – The purpose of this paper is to derive an easy-to-implement and highly accurate formula to approximate the change in the bond price resulting from a change in interest rates. Design/methodology/approach – The bond price is raised to an infinitesimal power and the Taylor series...

This research attempts to propose closed-form solutions for prices of credit-risky bonds, assuming a nonzero correlation between interest rates and credit spreads. The times of default of a credit-risky bond are modelled as the jump times of a Cox process, following the method of Lando, with an...