Credit risk model with lagged information

Research output: Contribution to journalArticlepeer-review


In this article, I propose a structural credit risk model with lagged information on a firm. Under the simple assumption that information on a firm's asset value is observed with a time lag, I show the model also has the properties of a reduced-form model with a default intensity process. In contrast to some previous studies, where both periodic and noisy accounting reports assumptions are necessary to derive the same result, I argue that lagged information is sufficient to generate a default intensity process. This difference in the assumptions has fundamentally different implications for the time series of credit spreads; under both the noisy accounting and lagged information assumptions, the model-implied credit spreads exhibit periodic patterns, whereas under my model assumptions they do not.

Original languageEnglish (US)
Pages (from-to)85-93
Number of pages9
JournalJournal of Derivatives
Issue number2
StatePublished - Dec 2008
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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