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dc.contributor.author
Gersbach, Hans
dc.contributor.author
Surulescu, Nicolae
dc.date.accessioned
2019-05-23T06:45:28Z
dc.date.available
2017-06-13T11:30:24Z
dc.date.available
2019-05-23T06:45:28Z
dc.date.issued
2010-07
dc.identifier.uri
http://hdl.handle.net/20.500.11850/152159
dc.identifier.doi
10.3929/ethz-a-006145085
dc.description.abstract
We consider a stochastic volatility model of the mean-reverting type to describe theevolution of a firm’s values instead of the classical approach by Merton with geometricBrownian motions. We develop an analytical expression for the default probability. Oursimulation results indicate that the stochastic volatility model tends to predict higherdefault probabilities than the corresponding Merton model if a firm’s credit quality isnot too low. Otherwise the stochastic volatility model predicts lower probabilities ofdefault. The results may have implications for various financial applications.
en_US
dc.format
application/pdf
en_US
dc.language.iso
en
en_US
dc.publisher
ETH Zurich, Center of Economic Research (CER-ETH)
en_US
dc.rights.uri
http://rightsstatements.org/page/InC-NC/1.0/
dc.subject
Stochastic volatility
en_US
dc.subject
Merton model
en_US
dc.subject
Default probabilities
en_US
dc.subject
Rate of mean reversion
en_US
dc.title
Default risk in stochastic volatility models
en_US
dc.type
Working Paper
dc.rights.license
In Copyright - Non-Commercial Use Permitted
ethz.journal.title
Economics Working Paper Series
ethz.journal.volume
10/131
en_US
ethz.size
25 p.
en_US
ethz.code.ddc
3 - Social sciences::330 - Economics
en_US
ethz.code.jel
JEL - JEL::G - Financial Economics::G1 - General Financial Markets::G13 - Contingent Pricing; Futures Pricing
en_US
ethz.code.jel
JEL - JEL::G - Financial Economics::G2 - Financial Institutions and Services::G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
en_US
ethz.code.jel
JEL - JEL::G - Financial Economics::G3 - Corporate Finance and Governance::G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
en_US
ethz.publication.place
Zurich
en_US
ethz.publication.status
published
en_US
ethz.leitzahl
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
en_US
ethz.date.deposited
2017-06-13T11:37:46Z
ethz.source
ECOL
ethz.identifier.importid
imp59366af1cb04729311
ethz.ecolpid
eth:1673
ethz.eth
yes
en_US
ethz.availability
Open access
en_US
ethz.rosetta.installDate
2017-07-17T08:00:36Z
ethz.rosetta.lastUpdated
2019-05-23T06:45:50Z
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true
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true
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