Jarrow Turnbull Model

Dictionary Says

Definition of 'Jarrow Turnbull Model'


One of the first reduced-form models for pricing credit risk. Developed by Robert Jarrow and Stuart Turnbull, the model utilizes multi-factor and dynamic analysis of interest rates to calculate the probability of default. Reduced-form models are one of two approaches to credit risk modeling, the other being structural.

Investopedia Says

Investopedia explains 'Jarrow Turnbull Model'


Structural models assume that the modeler - like a company's managers - has complete knowledge of its assets and liabilities, leading to a predictable default time. Reduced-form models assume that the modeler - like the market - has incomplete knowledge about the company's condition, leading to an inaccessible default time. Jarrow concludes that for pricing and hedging, reduced-form models are the preferred methodology.






comments powered by Disqus
Hot Definitions
  1. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  2. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
Trading Center