Bensoussan, Alain; Crouhy, Michel; Galai, Dan - In: Applied Mathematical Finance 1 (1994) 1, pp. 63-85
We propose a general framework to model equity volatility for a firm financed by equity and additional non-equity sources of funds. The stochastic nature of equity volatility is endogenous, and comes from the impact of a change in the value of the firm's assets on the financial leverage. We...