This paper proposes a valuation model for revolving credit agreements and loan commitments. Draw downs and repayments are only partially predictable by the bank. The bank can claim the material adverse change condition. The firm can cancel the credit agreement by stopping the payment of usage...

This paper tests variants of the Black (1995) model for pricing the sovereign Credit Default Swaps (CDS) of Greece, Ireland, Portugal, Spain and Italy. The default intensity of each country is driven by two latent Gaussian factors. The model, which well fits observed CDS rates, can only be...

This theoretical study presents residual income valuation formulae that account for the firm's credit risk and investors' personal taxation. The formulae can determine optimal financial leverage and the value of accounting based debt covenants. The firm's default may be triggered by breach of...