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...

Motivated by statistical tests on historical data that confirm the normal distribution assumption on the spreads between major constant maturity swap (CMS) indexes, we propose an easy-to-implement two-factor model for valuing CMS spread link instruments, in which each forward CMS spread rate is...