Abstract
In this paper we revisit Jarrow and Turnbull’s seminal paper on risky zero-bond option pricing and present two its extensions. Firstly, we are generalizing the zero-coupon bond option formula to coupon bond option formula while still preserving the analytical tractability. Secondly, we allow for intensity term-structure instead of just constant default intensity parameter. These two extensions result in comprehensive pricing framework for options linked on defaultable bonds.
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