Loans come with interest rates and monthly payments...but how are those determined? The more trustworthy you look as a borrower, the lower your interest rate and payments will be. If you have a low credit risk, that means you have a low chance of defaulting (not being able to make your payments).
The Jarrow Turnbull model is a credit risk model...the first of its kind. That means it helps lenders determine probability of default, and how they should price their debt products. The Jarrow Turnbull model is the first “reduced-form” credit risk model, which assumes incomplete knowledge, making it less sensitive to heavy assumptions than other credit risk models.
In today’s market, there’s a good chance that, if you’ve gotten a loan, both a reduced-form and a “structural” credit risk model were used to determine what your rate should be. And it all goes back to Jarrow Turnbull.