Frontiers of Mathematics in China >
Utility indifference valuation of corporate bond with rating migration risk
Received date: 27 Oct 2014
Accepted date: 25 Dec 2014
Published date: 12 Oct 2015
Copyright
A pricing model for a corporate bond with rating migration risk is established in this article. With the technology of utility-indifference valuation under the Markov-modulated framework, we analyze the price of a multi-rating bond and obtain closed formulae in a three-rating case. Based on the pricing formulae, the impacts of the parameters on the indifference price are analyzed and some reasonable financial explanations are provided as well.
Jin LIANG , Xudan ZHANG , Yuejuan ZHAO . Utility indifference valuation of corporate bond with rating migration risk[J]. Frontiers of Mathematics in China, 2015 , 10(6) : 1389 -1400 . DOI: 10.1007/s11464-015-0445-3
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