Recent work has suggested that strategic underperformance of debt-service obligations by equity holders can resolve the gap between observed yield spreads and those generated by Merton (1974)-style models.(...)

Recent work in corporate finance has suggested that strategic debt-service by equityholders works to lower debt values and raise yield spreads substantially. We show that this is not quite correct. With optimal cash management, defaults occasioned by deliberate underperformance (strategic...

In this paper, we propose an alternative approach for pricing and hedging American barrier options. Specifically, we obtain an analytic representation for the value and hedge parameters of barrier options, using the decomposition technique of separating the European option value from the early...

In this paper, we propose a general method for pricing and hedging non-standard American options. The proposed method applies to any kind of American-style contract for which the payoff function has a Markovian representation in the state space. Specifically, we obtain an analytic solution for...