Abstract
Regulations of the market require disclosure of information about the nature and extent of risks arising from the trades of the market instruments. There are several significant drawbacks in fixed income pricing modeling. In this paper we interpret a corporate bond price as a random variable. In this case the spot price does not a complete characteristic of the price. The price should be specified by the spot price as well as its value of market risk. This interpretation is similar to a random variable in Probability Theory where an estimate of the random variable completely defined by its cumulative distribution function. The buyer market risk is the value of the chance that the spot price is higher than it is implied by the market scenarios. First we quantify credit risk of the corporate bonds and then consider marked-to-market pricing adjustment to bond price. In the case when issuer of the corporate bond is the counterparty of the bond buyer counterparty and credit risks are coincide.
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