Abstract
In this paper, using a conception of continuous coupon bond with continuous accrual of coupons on simple fixed rate for pricing a risky zero-coupon bond is considered. It is shown that only employing this conception allows obtaining explicit equation for price of risky zero-coupon bond from fixed coupon bond prices without any assumption about default process and providing continuous monitoring default events despite periodicity of bond cash flows that improves estimation of credit risk. To apply the conception, it is proposed a simple condition for inversion of discrete bond into continuous coupon one. It is shown that this inversion is possible only for the following recovery assumption: a recovery rate is a part of the present value of remaining cash flows that will not be paid due to default but not for the fractional recovery of par assumption. Examples of calculating the implied survival probabilities and the credit spreads for Ukrainian Eurobonds are given.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
