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A Separating Equilibrium for Stock Repurchase Programs via PUT Options : Transforming a Mathematical Proof into Visual Form
Gyoshev, Stanley B. - 2012
We develop a mathematical proof demonstrating that only financially-strong firms will sell put options on their own … stock, but financially-weak firms will not. The sale of options on a company's own stock exposes the buyer to default risk … provide some empirical evidence that the combination of three very difficult concepts, put options, separating equilibria, and …
Persistent link: https://www.econbiz.de/10013097053
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Interest Tax Shields : A Barrier Options Approach
Couch, Robert B. - 2013
There is a link between barrier options and tax shields of interest expense. We combine this link with a traditional …
Persistent link: https://www.econbiz.de/10013091149
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Are Credit Spreads Too Low or Too High - A Hybrid Barrier Option Approach for Financial Distress
LIn, William T. - 2010
Based on the works of Brockman and Turtle (2003) and Giesecke (2004), we propose in this study a hybrid barrier option model to explain observed credit spreads. It is free of problems with the structural model which underprescribed credit spreads for investment grade corporate bonds and...
Persistent link: https://www.econbiz.de/10013148676
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Misvaluation and return anomalies in distress stocks
Eisdorfer, Assaf; Goyal, Amit; Zhdanov, Alexei - 2012
investors' inability to value distressed stocks correctly. We treat distressed stocks as options and construct a valuation model …
Persistent link: https://www.econbiz.de/10009558395
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Static Hedging of Defaultable Contingent Claims : A Simple Hedging Scheme Across Equity and Credit Markets
Ohsaki, Shuichi - 2011
defaultable contingent claim is accurately replicated by a feasible number of plain vanilla equity options. Another point is that … shorter maturity options are available to hedge longer maturity defaultable contingent claims. Through numerical examples, it …
Persistent link: https://www.econbiz.de/10013134712
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Model Implied Credit Spreads
Grass, Gunnar - 2011
I propose a new procedure for extracting probabilities of default from structural credit risk models based on model implied credit spreads (MICS) and implement this approach assuming a barrier option framework nesting the Merton (1974) model of capital structure. MICS are the increase in the...
Persistent link: https://www.econbiz.de/10013119626
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Implied Probabilities of Default from Colombian Money Market Spreads : The Merton Model under Equity Market Informational Constraints
León, Carlos - 2012
Informational constraints may turn the Merton Model for corporate credit risk impractical. Applying this framework to the Colombian financial sector is limited to four stock-market-listed firms; more than a hundred banking and non-banking firms are not listed.Within the same framework, firms'...
Persistent link: https://www.econbiz.de/10013097620
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Misvaluation and Return Anomalies in Distress Stocks
Eisdorfer, Assaf - 2012
investors' inability to value distressed stocks correctly. We treat distressed stocks as options and construct a valuation model …
Persistent link: https://www.econbiz.de/10013109035
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Libor Market Model with OIS-Discounting : Extension, Clarification and Valuation
Zhu, Jianwei - 2013
Since the Financial Crisis in 2009, interest rate derivative markets have witnessed a dramatic change in the valuation, especially with respect to cash-flow discounting, forward curve building und counterpart risks. The application of OIS discount curve to value collateralised interest...
Persistent link: https://www.econbiz.de/10013088283
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Rehypothecation Dilemma : Impact of Collateral Rehypothecation on Derivative Prices Under Bilateral Counterparty Credit Risk
Sakurai, Yuji - 2013
Rehypothecation is the practice where a derivatives dealer reuses collateral posted from its end user in over-the-counter (OTC) derivatives markets. Although rehypothecation benefits the end user through cost reduction of derivative trades, it also creates additional counterparty credit risk...
Persistent link: https://www.econbiz.de/10013090345