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Business Math Defaultable bond question

rukimaru

New member
Feb 28, 2014
1
Hi!

Just wondering if anyone could help with this question:

"now price a bond that is of a 4 year maturity and if it defaults in year t+k incurs a loss of 20%, but it does not terminate, and continues to be traded up to and including the fourth year"

as I understand this is a defaultable bond pricing question; but the formula calls for the probabilities?

I do not want an answer but, could someone point me in the direction of the topic to read or maybe some helpful information?

Thank you in advance!