Structural Models:
Considers default as being driven by the firm's assets.
Example: Merton
Note: Structural Models produce poor bond prices, but OK to use them to calculate PD.
Reduced-Form Models:
Proposes a relationship between bond price/yield and default risk. Default risk proxied by hazard rate. Then use market price to back out the hazard rate (hazard rate term structure fitting).
Example: Duffie and Singleton (1999)
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