This paper assesses whether agency ratings and market-based default risk measures are consistent for East Asian banks during the period from 1996 to 2006. While the market-based measures are broadly consistent with the credit rating assessments for the banks in the developed economies, the...

This paper has used the Arbitrage Theorem (Gordan Theorem) to show that first, all securities are derivatives for each other, and they are priced by the same risk neutral probability measure. Second, after the firm changes its debt-equity ratio, the equityholders can always combine the new...

This study presents significant factors that affect firms' decision whether to repurchase shares or not. Empirical results show that when the debt ratio is lower, the stock price is seriously underpriced and the firm size is larger, firms tend to buyback their own shares. Regarding employee...

We study a model for default contagion in intensity-based credit risk and its consequences for pricing portfolio credit derivatives. The model is specified through default intensities which are assumed to be constant between defaults, but which can jump at the times of defaults. The model is...

The credit risk along with the credit derivatives is a modern area of the financial business. In recent years this field becomes the most successful innovation, which accumulates significant cash flows as well as the highest attention within financial community. In this notice we present some...

We derive a pricing model for employee stock options (ESO) that expands on Ingersoll (2006) by including default risk and that additionally considers the effects of employee over-confidence. We find that illiquidity reduces subjective value and alters incentive effects and value sensitivities....

We offer clarifications on Cooley and Quadrini (2001) regarding financial frictions and risky corporate-debt pricing. Even in a frictionless world, the promised rate on corporate debt is not identical across firms and across capital structures and it is not equal to the risk-free rate. Frictions...

This paper studies the interaction among financing, entry, and exit decisions of firms in a competitve industry subject to aggregate uncertainty. In contrast to Fries, Miller and Perraudin (1997), I do not assume that a firm in default leaves the industry immediately. The implications on the...

We examine the optimal mixture and priority structure of bank and market debt using a tradeoff model where banks have the unique ability to renegotiate outside formal bankruptcy. Flexible bank debt offers a superior tradeoff between tax shields and bankruptcy costs. Ease of renegotiation limits...

This article incorporates well-documented managerial traits into a tradeoff model of capital structure to study their impact on corporate financial policy and firm value. Optimistic and/or overconfident managers choose higher debt levels and issue new debt more often, but need not follow a...