The Impact of Valuation Uncertainty in the Pricing of Risky Debt

Industry interest in equity-based contingent claims models for evaluating credit risky securities has recently surged. These methods assume away valuation uncertainty that exists in practice. This article explores the impact of valuation uncertainty on these contingent claims models, by analyzing ho...

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Veröffentlicht in:The journal of risk finance 2003-01, Vol.4 (2), p.56-67
Hauptverfasser: SOBEHART, JORGE R, KEENAN, SEAN C
Format: Artikel
Sprache:eng
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Zusammenfassung:Industry interest in equity-based contingent claims models for evaluating credit risky securities has recently surged. These methods assume away valuation uncertainty that exists in practice. This article explores the impact of valuation uncertainty on these contingent claims models, by analyzing how varying levels of model uncertainty bias default probability estimates obtained from standard contingent claims models.
ISSN:1526-5943
2331-2947
DOI:10.1108/eb022962