Risk Disaggregation and Credit Risk Valuation in a Merton Framework
HAYETTE GATFAOUI
(TEAM Pole Finance of the Université Paris I ‐ Panthéon‐Sorbonne in Paris. gatfaoui@univ‐paris1.fr)
297
Abstract
An investor in a corporate obligation is exposed to the default risk of the obligor. In this article, the author adapts the dynamic valuation framework to disaggregate systematic and idiosyncratic default risk of credit instruments. By articulating the distinction between diversifiable and undiversifiable risk, the article develops a two‐factor model for pricing default risk.
Citation
GATFAOUI, H. (2003), "Risk Disaggregation and Credit Risk Valuation in a Merton Framework", Journal of Risk Finance, Vol. 4 No. 3, pp. 27-42. https://doi.org/10.1108/eb022964
Publisher
:MCB UP Ltd
Copyright © 2003, MCB UP Limited