Houweling, Patrick; Mentink, Albert; Vorst, Ton - Tinbergen Instituut - 2003
We value rating-triggered step-up bonds with three methods: (i) the Jarrow, Lando andTurnbull (1997, JLT) framework …, (ii) a similar framework using historical probabilities and(iii) as plain vanilla bonds. We find that the market seems to … value single step-up bondsaccording to the JLT model, while it values multiple step-up bonds as plain vanilla bonds …