Structural Models for the Valuation of Corporate Securities
Type
dissertation project
Start Date
September 1, 2004
End Date
August 31, 2005
Status
ongoing
Description
The research project extends the model of Goldstein, Ju and Leland (2001), Ammann and Genser (2004). The generalized framework is economically intuitive and flexible enough to (i) be estimated directly and (ii) be extended theoretically in several directions.
Direct empirical implementations of structural credit risk models are rare in the literature because such models impose too many restrictions on the capital structure. The proposed CSF allows for several debt issues and equity values simultaneously. Therefore, time series of bond and equity prices can be used for estimation. A successful estimation would allow structural credit risk models to be applied in practice.
Theoretical extensions of the CSF aim at a more thorough modelling of decision making. (i) A thorough analysis of optimal future debt issuing seems warranted since future debt issues have an impact on current bond and equity prices. A solution of the problem must consider game theoretic arguments concerning the willingness of prospective debt holders to accept a debt contract offered by the firm. (ii) Multi-firm models can be used to analyse risk-management and default dependencies. Both issues are of particular interest for the management of banks' loan portfolios. (iii) The introduction of stochastic interest rates might change some results due to a changed anticipation of future firm values and thus bankruptcy behaviour.
Direct empirical implementations of structural credit risk models are rare in the literature because such models impose too many restrictions on the capital structure. The proposed CSF allows for several debt issues and equity values simultaneously. Therefore, time series of bond and equity prices can be used for estimation. A successful estimation would allow structural credit risk models to be applied in practice.
Theoretical extensions of the CSF aim at a more thorough modelling of decision making. (i) A thorough analysis of optimal future debt issuing seems warranted since future debt issues have an impact on current bond and equity prices. A solution of the problem must consider game theoretic arguments concerning the willingness of prospective debt holders to accept a debt contract offered by the firm. (ii) Multi-firm models can be used to analyse risk-management and default dependencies. Both issues are of particular interest for the management of banks' loan portfolios. (iii) The introduction of stochastic interest rates might change some results due to a changed anticipation of future firm values and thus bankruptcy behaviour.
Leader contributor(s)
Genser, Michael
Funder
Notes
Aufenthaltsort: University of Southern Denmark in Odense;
Norwegian School of Economics and Business Administration in Bergen
Referent: Prof. Dr. Andreas Grünbichler (s/bf-HSG)
Norwegian School of Economics and Business Administration in Bergen
Referent: Prof. Dr. Andreas Grünbichler (s/bf-HSG)
Division(s)
Eprints ID
18148