Abstract
In general, the price of a bond in the market reflects in part the credit quality of the bond issuer. In other words, the price includes the credit risk of the issuer. This includes the risk of the issuer declaring bankruptcy, deferring payment of coupons, or being downgraded in its credit quality rating. Since there are no unique ways to define or observe the credit quality, we often rely on the quality rating provided by well-known rating institutions such as Moody’s, Standard & Poors, etc. In bond market, bond price changes whenever there is a rating change. Therefore, in bond pricing it is required to take into account the credit risk of the issuer.
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© 2003 Springer Science+Business Media New York
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Kariya, T., Liu, R.Y. (2003). Pricing Defaultable Bonds. In: Asset Pricing. Springer, Boston, MA. https://doi.org/10.1007/978-1-4419-9230-7_12
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DOI: https://doi.org/10.1007/978-1-4419-9230-7_12
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-4849-8
Online ISBN: 978-1-4419-9230-7
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