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Major differences between assumptions for the Structural Model and Reduced Form Model?

January 12, 2017
Structural Model Reduced Form Model
  • Balance sheet is simple with only one class of zero coupon bond.
  • Asset is actively traded in the market.
  • Risk-free rate is constant.
  • There is a zero coupon bond traded in the market.
  • Risk-free rate is stochastic.
  • Default risk depends on the economic conditions.
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From → Asset Valuation

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