A Structural Framework for the Pricing of Corporate Securities: Economic and Empirical Issues (Lecture Notes in Economics and Mathematical Systems Book 566)

This book is the first comprehensive treatment of structural credit risk models for the simultaneous and consistent pricing of corporate securities. Through the development of a flexible economic framework based on the firm’s EBIT, the reader is taken from the economic principles of firm value models to the empirical implementation. Analytical solutions are provided if EBIT follows an arithmetic or geometric Brownian motion. In addition, numerical methods are proposed to solve more advanced economic settings or to price derivatives on corporate securities. Numerical examples make the theory easily accessible and show its ability to reproduce empirical observations. An econometric implementation guides towards practical application. Hence, the book provides a state-of-the-art exposition of corporate securities pricing for academics and practitioners alike. A treatment of structural credit risk models for simultaneous and consistent pricing of corporate securities. This book takes us from the economic principles of firm value models to the empirical implementation, through the development of an economic framework. It provides exposition of corporate securities pricing for academics and practitioners. 1. Introduction -- 2. The Corporate Securities Framework -- 3. Abm- And Gbm-ebit-models -- 4. Numerical Illustration Of The Abm- And Gbm-model -- 5. Empirical Test Of The Ebit-based Credit Risk Model -- 6. Concluding Remarks -- A. Notes On The Equity Option Valuation. Michael Genser. Includes Bibliographical References. Introduction....Pages 1-8 The Corporate Securities Framework....Pages 9-34 ABM- and GBM-EBIT-Models....Pages 35-74 Numerical Illustration of the ABM- and GBM-Model....Pages 75-121 Empirical Test of the EBIT-Based Credit Risk Model....Pages 123-147 Concluding Remarks....Pages 149-154