Real world credit spread model?

Church · February 2nd, 2016, 12:02 pm

Hello,I am looking for a real world stochastic credit spread model that can capture the historical distribution (i.e. fat tails), and can be generated for 1 year forward but also multiple years. Any suggestions?Thanks

Tedypendah · February 16th, 2016, 2:29 am

Are you trying to replicate credit spreads? Why not use the implied volatility approach in a black-scholes world?