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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 relevant. Since publishing of the major Altman's work (1968), based on multiple discriminant analysis, this methodological area has been considerably changed. Taking into...

Persistent link: https://www.econbiz.de/10013100924

Expected Equity Returns Should Correlate with Idiosyncratic Risk

Bruno, Giovanni - 2018

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Persistent link: https://www.econbiz.de/10012910108

Default Contagion in a Two-Tree Economy

Ericsson, Jan; Jeanneret, Alexandre; Lu, Yiliu - 2021

's decision towards default. This mechanism induces contagion in default probabilities, leverage, and financial volatility across …

Persistent link: https://www.econbiz.de/10013229878

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

Caution under Ambiguity and Blowups

Bakshi, Gurdip; Crosby, John; Gao, Xiaohui - 2022

investment strategies. Linking developed theory to data, we feature evidence on a real-world question: Do investors gain by …

Persistent link: https://www.econbiz.de/10013403587

Persistent Crises and Levered Asset Prices

Kuehn, Lars-Alexander; Schreindorfer, David; Schulz, Florian - 2021

This paper shows that standard disaster risk models are inconsistent with the behavior of stock market volatility and … replicates the firm-level implied volatility curve and its cross-sectional relation with observable proxies of default risk …

Persistent link: https://www.econbiz.de/10013251573

A Structural Model of Debt Pricing with Creditor-Determined Liquidation

Bruche, Max - 2011

This paper develops a continuous time asset pricing model of debt and equity in a framework where equityholders decide when to default but creditors decide when to liquidate. This framework is relevant for environments where creditors exert a significant influence on the timing of liquidation,...

Persistent link: https://www.econbiz.de/10013134316

Rollover Risk and Corporate Bond Spreads

Valenzuela, Patricio - 2010

This paper examines whether rollover risk is priced on corporate bond spreads. Using a novel data set and new proxies for rollover risk and market illiquidity, the empirical analysis developed reveals that market illiquidity affects corporate bond spreads beyond a liquidity premium through a...

Persistent link: https://www.econbiz.de/10013136794

Chebyshev Greeks : Smoothing Gamma without Bias

Maran, Andrea; Pallavicini, Andrea; Scoleri, Stefano - 2021

The computation of Greeks is a fundamental task for risk managing of financial instruments. The standard approach to their numerical evaluation is via finite differences. Most exotic derivatives are priced via Monte Carlo simulation: in these cases, it is hard to find a fast and accurate...

Persistent link: https://www.econbiz.de/10013220500

Option-Based Intermediary Leverage

Grünthaler, Thomas; Lorenz, Friedrich; Meyerhof, Paul - 2021

We introduce an option-implied proxy for the health of ﬁnancial intermediaries—the Leverage Bearing Capacity (LBC). LBC is the leverage of a ﬁctitious intermediary that targets a ﬁxed level of risk and rebalances its capital structure on an ongoing basis. Our measure is based on market...

Persistent link: https://www.econbiz.de/10013222130