The objective of this paper is to identify the determinants of office capitalization rates for a panel of 52countries (developed and emerging countries) between 2000 and 2006. Our assumption, based on a CapitalAsset Pricing Model, is that the capitalization rate should be at least proportional...

Within the structural approach for credit risk models we discuss the optimal exercise of the callable and convertible bonds. The Vasiĕk-model is applied to incorporate interest rate risk into the firm’s value process which follows a geometric Brownian motion. Finally, we derive pricing bounds...

Fama and French (1992) suggest that the positive value premium results from risk of financial distress. However, recent empirical research has found that financially distressed firms have lower stock returns, using empirical estimates of default probabilities. This paper reconciles the positive...

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...

The aim of this paper is to study the impact of the bankruptcy law on financing, investment, default and liquidation decisions of firms. We build a model in which the firm has the opportunity to get into debt to finance an investment whose return is stochastic. Shareholders and bondholders...

In this paper, we show that in a model where investors have heterogeneous preferences, the expected return of risky assets depends on the idiosyncratic coskewness beta, which measures the co-movement of the individual stock variance and the market return. We find that there is a negative...

Return anomalies are most pronounced among distressed stocks. We attribute this finding to the role of misvaluation and investors' inability to value distressed stocks correctly. We treat distressed stocks as options and construct a valuation model that explicitly takes into account the value of...

This paper develops a model with the novel feature that firms can renegotiate debt both in and outside distress. We show that this feature is crucial for debt renegotiation models to explain corporate policies and debt prices. Specifically, the model reflects empirical credit spread patterns,...

We extend the analysis of the interbank market model of Gale and Yorulmazer (2013) by studying a larger set of trading mechanisms. A trading mechanism, which allows for randomized trading, restores efficiency. In contrast to Gale and Yorulmazer, we find that fire-sale asset prices are efficient...