Grüne, Lars; Semmler, Willi; Bernard, Lucas - Society for Computational Economics - SCE - 2006
Following the lead of Merton (1974), recent research has focused on the relationship of credit risk to firm value …, has shown that firm-value models, incorporating company-specific endogenous risk premia, imply that exposure to risk does … impact asset value. In this paper, we extend these results to study the effects of random shocks to diversified capital …