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of 1974. Reduced-form models focus on modeling the probability of default as a statistical process, whereas structural-models inhere a microeconomic model of the firm's
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Reduced-form models are an approach to credit risk modeling that contrasts sharply with "structural credit models", the best known of which is the
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is modeled as a statistical process. The model extends the reduced-form model of Merton (1976) to a random interest rates framework.
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Advanced
Financial Risk Management: Tools & Techniques for Integrated Credit Risk and Interest Rate Risk Modeling
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Robert A. Jarrow and Stuart
Turnbull, "Pricing Derivatives on Financial Securities Subject to
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Robert Merton, “Option
Pricing When Underlying Stock Returns are Discontinuous”
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136:“On the Pricing of Corporate Debt: The Risk Structure of Interest Rates,”
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Jarrow, Robert, Donald R. van
Deventer, Li Li, and Mark Mesler (2006).
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Kamakura Risk
Information Services Technical Guide, Version 4.1
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van
Deventer; Donald R.; Kenji Imai; Mark Mesler (2004).
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156:Credit Risk: Pricing, Measurement, and Management
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55:of both the structural and reduced-form types.
154:Duffie, Darrell; Kenneth J. Singleton (2003).
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177:: CS1 maint: multiple names: authors list (
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124:, 3, January–March, 1976, pp. 125–44.
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