… 2 2 ,ρ , where r 1 and r 2 denote the normalized asset returns as defined in (3) for obligors 1
and 2, respectively, and d 2 1 and d 2 2 are the corresponding distant to default as in (4). N 2 …

… 11 Recall that p L = 1 − p I is exogenously determined (assumption d), and that K A and S 0
are known parameters at the time the liquidity … For a characterization of options, see Galai 13. …

In this paper a combined capital asset pricing model and option pricing model is considered
and then applied to the derivation of equity's value and its systematic risk. In the first section …

This paper explores the traditional and prevalent approach to credit risk assessment – the
rating system. We first describe the rating systems of the two main credit rating agencies, …

… If p = 1 - p = 0.5, then the volatility is 0.5(u - d). In our simplified example, we approximate
the volatility by (u - d). Because the probabilities do not affect the pricing, and there are no …

… The price of a share at t, of the firm with no warrants is P*,, and P*, is a function of D, and
D2.'9 The value at t, of a share in the firm with warrants will also be determined by D, and D2 as …

… In test D of table 1, I report the results for the case in which r = 10%7o (as in test C), but the
variance rate is reestimated daily, based on the latest 30 daily observations of rate of return …

This article documents that government T‐bills provided a higher yield to maturity than an
equally risky illiquid asset (bank deposits) in Israel. The difference between the return on the …

… by D/V: while the striking price of the option remains unchanged, where D is the per share
dividend and V: is the market price of the share exdividend. [See Merton (1973, pp. 151-154).] …

Many financial assets, especially government bonds, are issued by an auction. An important
feature of the design is the auction pricing mechanism: uniform versus discriminatory. …