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Managing the risks of corporate bond portfolios : new evidence in the light of the sub‐prime crisis
Barone-Adesi, Giovanni; Carcano, Nicola; Dall'O, Hakim - 2012
We consider modeling errors in the hedging of a portfolio composed from BBB-rated bonds. By doing this, we open a new … value of indexlinked credit derivatives is very limited: hedging portfolios including only T-bond futures can reduce the … hedging. This is consistent with the literature identifying an important non-default component within corporate bond spreads …
Persistent link: https://www.econbiz.de/10009558422
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On the strategic value of risk management
Léautier, Thomas-Olivier; Rochet, Jean-Charles - 2013
ranging from manufacturing to energy retailing, where risk averse fi rms decide on their hedging strategies before their … product market strategies. We fi nd that hedging modi es the pricing and production strategies of firms. This strategic effect … shareholders risk aversion. It has diametrically opposed impacts depending on the nature of product market competition: hedging …
Persistent link: https://www.econbiz.de/10009750629
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A corporate financing-based asset pricing model
Steri, Roberto - 2018
I show that an asset pricing model for the equity claims of a value-maximizing firm can be constructed from its optimal financial contracting behavior. I study a dynamic contracting model in which firms trade off the costs and benefits of a given promise to pay external lenders in a specific...
Persistent link: https://www.econbiz.de/10011900221
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Dynamic capital structure under managerial entrenchment : evidence from a structural estimation
Morellec, Erwan; Nikolov, Boris; Schürhoff, Norman - 2009
We develop a dynamic tradeoff model to examine the importance of manager-shareholder conflicts in capital structure choice. Using panel data on leverage choices and the model's predictions for different statistical moments of leverage, we show that while refinancing costs help explain the...
Persistent link: https://www.econbiz.de/10003970297
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Optimal securitization with heterogeneous investors
Malamud, Semyon; Rui, Huaxia; Whinston, Andrew B. - 2010
We solve the problem of optimal securitization for an issuer facing heterogeneous investors with arbitrary time and risk preferences. We show that the optimal securitization is characterized by multiple nonlinear tranches, and each investor gets a portfolio of these tranches. In particular, when...
Persistent link: https://www.econbiz.de/10003979499
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Consistent valuation of project finance and LBO's using the flows-to-equity method
Cooper, Ian; Nyborg, Kjell G. - 2010
A common method of valuing the equity in highly leveraged transactions is the flows-to-equity method. When applying this method various formulas can be used to calculate the time-varying cost of equity. In this paper we show that some commonly used formulas are inconsistent with the assumptions...
Persistent link: https://www.econbiz.de/10008797682
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The relationship between credit default swap and cost of equity capital
Barone-Adesi, Giovanni; Brughelli, Moreno - 2010
We want to assess the relationship between the equity and the debt cost of capital. Using a very simple dividend discount model we compute the implied discount rate and we compare it with the corresponding premium on the corporate credit default swap using a cointegration approach. We...
Persistent link: https://www.econbiz.de/10008797690
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A simple model of the firm life cycle
Schenk-Hoppé, Klaus Reiner; Schweri, Urs - 2010
The optimal investment-dividend policy of a financially constrained firm whose earnings are subject to additive shocks is shown to exhibit several stylized economic and financial features of the firm life cycle which usually require considerably more complex models. This parsimonious model...
Persistent link: https://www.econbiz.de/10008797762
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Financing and takeovers
Morellec, Erwan (contributor); Zhdanov, Alexei (contributor) - 2006
This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...
Persistent link: https://www.econbiz.de/10003394282
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Underinvestment vs. overinvestment : evidence from price reactions to pension contributions
Franzoni, Francesco - 2008
Mandatory contributions to defined benefit pension plans provide a unique identification strategy to estimate the market's assessment of the value of internal resources controlling for investment opportunities. The drop in prices following these cash outflows is magnified for firms that appear a...
Persistent link: https://www.econbiz.de/10003962040