Defaultable bonds and vulnerable options pricing formulae

摘要

This paper makes use of the "signaling approach" for modeling the default risk of some risky bonds and vulnerable options.An analytical price formula for defaultable bonds is derived by applying distribution of the minimum of Brownian motion.At same time,a closed form solution for vulnerable Black-Scholes options is also obtained based on change of measure and the Girsanov's Theroem.With an analytical formula,one avoids the coding of numerical procedure.