The Direct Approach to Debt Option Pricing
b'We review the continuous{time literature on the so{called direct approach to bond option\\npricing. Going back to Ball and Torous (1983), this approach models bond price processes directly\\n(i.e. without reference to interest rates or state variable processes) and applies methods that Black and\\nScholes (1973) and Merton (1973) had originally developed for stock options. We describe the principal\\nmodelling problems of the direct approach and compare in detail the solutions proposed in the literature'