The Impact of Valuation Uncertainty in the Pricing of Risky Debt
JORGE R. SOBEHART
(Vice president and senior analyst at Citigroup Risk Architecture in New York, NY. jorge.r.sobeharl@citi.com)
SEAN C. KEENAN
(Vice president and senior analyst at Citigroup Risk Architecture in New York, NY. sean.keenan@citi.com)
312
Abstract
Industry interest in equity‐based contingent claims models for evaluating credit risky securities has recently surged. These methods assume away valuation uncertainty that exists in practice. This article explores the impact of valuation uncertainty on these contingent claims models, by analyzing how varying levels of model uncertainty bias default probability estimates obtained from standard contingent claims models.
Citation
SOBEHART, J.R. and KEENAN, S.C. (2003), "The Impact of Valuation Uncertainty in the Pricing of Risky Debt", Journal of Risk Finance, Vol. 4 No. 2, pp. 56-67. https://doi.org/10.1108/eb022962
Publisher
:MCB UP Ltd
Copyright © 2003, MCB UP Limited