search query: @author Acharya, V. V. / total: 3
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| Author: | Acharya, V. V. Das, S. R. Sundaram, R. K. |
| Title: | Pricing Credit Derivatives with Rating Transitions |
| Journal: | Financial Analysts' Journal
2002 : MAY-JUN, VOL. 58:3, p. 28-44 |
| Index terms: | FINANCE PRICING PRICES CREDIT |
| Language: | eng |
| Abstract: | The authors present a model for pricing risky debt and valuing credit derivatives that is easily calibrated to existing variables. The authors' approach expands a classical term-structure model to allow for multiple rating classes of debt. The framework has two salient features: (1) it uses a rating-transition matrix as the driver for the default process, and (2) the entire set of rating categories is calibrated jointly, which allows arbitrage-free restrictions across rating classes as a bond migrates among them. The authors illustrate the approach by applying it to price credit-sensitive notes that have coupon payments linked to the rating of the underlying credit. |
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