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  • January 2008
  • Background Note
  • HBS Case Collection

Valuing Risky Debt

By: Joshua Coval and Erik Stafford
  • Format:Print
  • | Pages:6
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Abstract

This lesson develops the classical structural approach to pricing and hedging credit risk: Merton's (1974) contingent claims model of debt and equity claims. This model is used to make investment and risk management decisions in an over-the-counter (OTC) market for distressed bonds.

Keywords

Borrowing and Debt; Credit; Investment; Price; Risk Management; Mathematical Methods; Valuation

Citation

Coval, Joshua, and Erik Stafford. "Valuing Risky Debt." Harvard Business School Background Note 208-111, January 2008.
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About The Authors

Joshua D. Coval

Finance
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Erik Stafford

Finance
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