کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
480747 | 1445989 | 2016 | 20 صفحه PDF | دانلود رایگان |
• We design and implement a dynamic program for valuing corporate securities.
• Our setting accommodates arbitrary junior and senior corporate debts.
• We consider an extended balance-sheet equality and a reorganization process.
• We compute the term structure of yield spreads and default probabilities.
We design and implement a dynamic program for valuing corporate securities, seen as derivatives on a firm’s assets, and computing the term structure of yield spreads and default probabilities. Our setting is flexible for it accommodates an extended balance-sheet equality, arbitrary corporate debts, multiple seniority classes, and a reorganization process. This flexibility comes at the expense of a minor loss of efficiency. The analytical approach proposed in the literature is exchanged here for a quasi-analytical approach based on dynamic programming coupled with finite elements. To assess our construction, which shows flexibility and efficiency, we carry out a numerical investigation along with a complete sensitivity analysis.
Journal: European Journal of Operational Research - Volume 249, Issue 2, 1 March 2016, Pages 751–770