A framework for valuing corporate securities

We suggest a methodology for valuing corporate securities that allows the straightforward derivation of closed form solutions for complex scenarios. The tractability of the framework stems from its modularity-we provide a number of intuitive building blocks that are sufficient for valuation in typic...

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Bibliographic Details
Published inApplied mathematical finance. Vol. 5; no. 3-4; pp. 143 - 163
Main Authors Ericsson, Jan, Reneby, Joel
Format Journal Article
LanguageEnglish
Published Taylor & Francis Group 01.09.1998
Taylor and Francis Journals
SeriesApplied Mathematical Finance
Subjects
Barrier Options
Corporate Debt
Credit Risk
Option Pricing
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Summary:We suggest a methodology for valuing corporate securities that allows the straightforward derivation of closed form solutions for complex scenarios. The tractability of the framework stems from its modularity-we provide a number of intuitive building blocks that are sufficient for valuation in typical situations. A further advantage of our approach is that it makes economic interpretation far easier than what is typically possible with other approaches, such as solving systems of partial differential equations. As examples we consider a corporate coupon bond with discrete payments, and debt subject to strategic debt service.
ISSN:1350-486X
1466-4313
DOI:10.1080/135048698334619