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Abstract and Applied Analysis
Volume 2014, Article ID 878306, 9 pages
Research Article

The Optimal Analysis of Default Probability for a Credit Risk Model

1The School of Finance, Southwestern University of Finance and Economics, Chengdu 610074, China
2Department of Mathematics, Xinjiang University of Finance and Economics, Urumqi 830012, China

Received 2 January 2014; Accepted 9 February 2014; Published 17 March 2014

Academic Editor: Sheng-Jie Li

Copyright © 2014 Aiyin Wang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


A credit risk mathematical model is investigated. Under regular conditions, a different recovery scheme is proposed, which is an extension of the recovery of treasury value scheme with time-continuous liquidation. Assuming that a function depends on the optimal time for the liquidation and the recovery rate, we obtain the functional expression of the risky bond price. When the firm value follows a jump-diffusion process with a Log-exponentially distributed jump, we develop a method to obtain the optimal default probability with time-continuous liquidation.