A free boundary problem for defaultable corporate bond with credit rating migration risk and its asymptotic behavior
Yuan Wu, Jin Hu Liang, Bei Hu · Discrete and Continuous Dynamical Systems - B · 2019
In this paper, valuation of a defaultable corporate bond with credit rating migration risk is considered under the structure framework by using a free boundary model. The existence, uniqueness and regularity of the solution are obtained. Furthermore, we analyze the solution's asymptotic behavior and prove that the solution is convergent to an closed form solution. In addition, numerical examples are also shown.