  This paper presents a discrete--time equity derivatives pricing model with
default risk in a no--arbitrage framework. Using the equity--credit reduced
form approach where default intensity mainly depends on the firm's equity
value, we deduce the Arrow--Debreu state prices and the explicit pricing result
in discrete time after embedding default risk in the pricing model. We prove
that the discrete--time defaultable equity derivatives pricing has convergence
stability, and it converges weakly to the continuous--time pricing results.
