A Stochastic Delay Model For Pricing Debt And Loan Guarantees:   Theoretical Results
  We consider that the price of a firm follows a non linear stochastic delay differential equation. We also assume that any claim value whose value depends on firm value and time follows a non linear stochastic delay differential equation. Using self-financed strategy and replication we are able to derive a Random Partial Differential Equation (RPDE) satisfied by any corporate claim whose value is a function of firm value and time. Under specific final and boundary conditions, we solve the RPDE for the debt value and loan guarantees within a single period and homogeneous class of debt. 
Elisabeth Kemajou, Salah-Eldin Mohammed, Antoine Tambue
q-fin.PR