This article develops an operationally useful contingent-claims model for valuing employee stock options (ESOs) that takes into account ESO vesting requirements, transfer restrictions, early exercise, and forfeiture. I extend the familiar Black-Scholes-Merton (BSM) model, which most firms use to...

Major European banks are significantly undercapitalized as compared to large American banks, and, more importantly, as compared to the capital levels they would need to survive another severe financial crisis. Bank capital shortfalls in Italy, Spain, Germany, France and the United Kingdom, in...

I develop Heath-Jarrow-Morton extensions of the Vasicek and Jamshidian pure-diffusion models, extend these models to incorporate Poisson-Gaussian interest rate jumps, and obtain closed-form models for valuing default-free, zero-coupon bonds and European call and put options on default-free,...

Participants in the private equity market often use the share prices of publicly traded regular (or C) corporations as bench marks for valuing pass-through entities, such as S corporations and limited liability companies (LLCs). This paper analyzes the tax-related valuation adjustments that are...

A premium debt swap involves exchanging a new issue of high-coupon bonds for similar outstanding high-coupon debt. The swap achieves a tax-timing arbitrage. By reissuing premium bonds, the borrower preserves debt service parity and realizes a net-present-value benefit equal to the difference...

We derive consistent contingent-claims models for valuing implicit options embedded in structured notes, and use them to compare the cost of fixing the spread with that of fixing the price in bond tender offers. We analyze 289 bond tender offers and find that the cost difference is economically...

In this paper, we use a structural credit risk model developed by Geske (1977) and generalized by Chen et al. (2014) to assess the delinquency risk of U.S. Treasury debt implied by U.S. sovereign CDS spreads. We also use the fitted structural model to determine the implied debt ceiling for the...

We investigate the argument that securities frauds are preceded by surprisingly good firm performance but are followed by rapid negative investor response by studying the long-term stock performance of a sample of 430 firms that disclosed securities fraud and experienced class action lawsuits...

This paper reviews innovative corporate securities through year-end 2000. We describe 80 distinct new securities, which we categorize as 1) debt, 2) preferred stock, 3) convertible securities, and 4) common equity. For each security, we analyze probable sources of value added and provide a brief...