• Merton Black-Cox pricing

The main aim of this thesis is to examine the main structural models of credit risk. In particular, after a brief introduction on what credit risk is, there will be a complete overview of stochastic processes and stochastic calculus, with a particular focus on the geometric Brownian motion (GBM) and the Ito’s stochastic integral. Then the study will converge on the explanation of both the Merton and the Black-Cox model of credit risk, highlighting their strengths and weakness, as well as the comparison of the two the determination of the price of a defaultable bond or credit default swap for different maturities and different parameters of interest.