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Costly External Finance, Liquidity Risk, and Default Risk
Yang, Jun - 2011
I use the 2007-2008 financial crisis to gauge how internal financial resources and external financial constraints mitigate or worsen the impact of the crisis on default risk of US industrial firms. I identify heterogeneity in short-term funding needs at the onset of the crisis by exploiting...
Persistent link: https://www.econbiz.de/10013128496
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Default Contagion in a Two-Tree Economy
Ericsson, Jan; Jeanneret, Alexandre; Lu, Yiliu - 2021
We propose an explanation for default contagion based on a Lucas model with two independent debt-financed trees. The transmission mechanism is that variations in the size of one tree impact the level of risk premium and the default decision for all borrowers. If a negative shock hits one tree,...
Persistent link: https://www.econbiz.de/10013229878
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Modelling Default Risk : A New Structural Approach
Yildirim, Yildiray - 2011
This paper provides an alternative approach to the structural credit risk models. The first-passage-time approach extends the original Merton (Journal of Finance 29, 449-470) model by accounting for the fact that the default may occur not only at the debt's maturity, but also prior to this date....
Persistent link: https://www.econbiz.de/10013130480
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The Mills Ratio and the Behavior of Redeemable Bond Prices in the Gaussian Structural Model of Corporate Default
Spencer, Peter - 2017
This paper shows that forward default intensities in the Black and Cox (1976) model of corporate default can be expressed in terms of the Mills Ratio (Mills, 1926). The behavior of the forward default intensity and hence the survivorship functions then follows from inequalities that are...
Persistent link: https://www.econbiz.de/10012954783
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The Evolution of Valuation in Bankruptcy
Simkovic, Michael - 2017
Financial analyses such as valuation, solvency and capital adequacy play a crucial role in bankruptcy. Over the course … of the 20th century, methods of financial analysis in bankruptcy have shifted from earnings multiples to discounted cash … credit spreads. Each shift in bankruptcy court practice followed shifts in financial services industry practice and …
Persistent link: https://www.econbiz.de/10012968788
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A Binary Model Versus Discriminant Analysis to Corporate Bankruptcies for Emerging Market
Makeeva, Elena - 2012
The problem of the firm bankruptcy prediction was investigated by foreign researchers in the 1930s and it still remains … bankruptcy and using models appropriate for prediction bankruptcy in the area of a construction industry during financial crisis …. This investigation has been carried out on the basis of logit and probit analysis. The main reasons of bankruptcy revealed …
Persistent link: https://www.econbiz.de/10013104287
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A Binary Model Versus Discriminant Analysis to Corporate Bankruptcies for Emerging Market
Makeeva, Elena - 2012
The problem of the firm bankruptcy prediction was investigated by foreign researchers in the 1930s and it still remains … bankruptcy and using models appropriate for prediction bankruptcy in the area of a construction industry during financial crisis …. This investigation has been carried out on the basis of logit and probit analysis. The main reasons of bankruptcy revealed …
Persistent link: https://www.econbiz.de/10013100924
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Secured and Unsecured Debt in Creditor-friendly Bankruptcy
Francois, Pascal; Naqvi, Hassan - 2022
This article develops a continuous-time asset pricing model for valuing corporate securities in the presence of secured and unsecured debt. We consider a framework where creditors dominate the renegotiation process. We show that the unsecured creditors are incentivized to liquidate the firm...
Persistent link: https://www.econbiz.de/10014239730
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Hedging interest rate risk using a structural model of credit risk
Huang, Jing-Zhi; Shi, Zhan - 2016
This paper investigates predictions of structural credit risk models for interest rate sensitivities of corporate bond returns. Recent evidence has shown that the existing models fail to capture this sensitivity (a stylized fact referred to as the interest rate sensitivity puzzle). We propose...
Persistent link: https://www.econbiz.de/10011810957
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Correlation between intensity and recovery in credit risk models
Gaspar, Raquel M. (contributor); Slinko, Irina (contributor) - 2005
We start by presenting a reduced-form multiple default type of model and derive abstract results on the influence of a state variable X on credit spreads, when both the intensity and the loss quota distribution are driven by X. The aim is to apply the results to a concrete real life situation,...
Persistent link: https://www.econbiz.de/10003191126