A Firm Value Pricing Model for Derivatives with Counterparty Default Risk

2001 ◽  
pp. 77-140
Author(s):  
Manuel Ammann
Keyword(s):  
Firm Value ◽  
Default Risk ◽  
Pricing Model ◽  
Value Pricing

Corporate bond pricing model with stochastically volatile firm value process

2016 ◽  
Vol 148 ◽  
pp. 41-44
Author(s):  
Woon Wook Jang ◽  
Young Ho Eom ◽  
Yong Joo Kang
Keyword(s):  
Firm Value ◽  
Corporate Bond ◽  
Bond Pricing ◽  
Pricing Model

scholarly journals Impact of CEO pensions on value relevance of R&D expenditures

2018 ◽  
Vol 16 (4) ◽  
pp. 224-234
Author(s):  
Kyung Jin Park ◽  
Kyoungwon Mo
Keyword(s):  
Firm Value ◽  
Default Risk ◽  
Value Relevance ◽  
Least Square ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Dependent Variables ◽  
Unfunded Liabilities ◽  
The Impact

Since CEO pension is unsecured and unfunded liabilities of the firm, it induces CEOs to have long-term incentives towards minimizing their firms’ default risk. Motivated by the unique characteristics of CEO pension, this study investigates the impact of CEO pension on the value relevance of R&D expenditures. Using Tobin’s Q ratio to measure firm value, the empirical results show that CEO pension intensifies the relation between R&D expenditures and Tobin’s Q ratio. The results remain robust in two-stage least square and propensity score matching regression analysis to address the endogeneity issues in the relation between CEO pension and the value relevance of R&D expenditures. In addition, the regression results with ROA and F-score as the alternative dependent variables also confirm that CEO pension intensifies the relation between R&D expenditures and firm value.

scholarly journals Pricing Vulnerable Options in a Mixed Fractional Brownian Motion with Jumps

2021 ◽  
Vol 2021 ◽  
pp. 1-15
Author(s):  
Panhong Cheng ◽  
Zhihong Xu
Keyword(s):  
Brownian Motion ◽  
Fractional Brownian Motion ◽  
Firm Value ◽  
Stock Price ◽  
Pricing Model ◽  
Mixed Fractional Brownian Motion ◽  
Actuarial Approach ◽  
Basic Parameters ◽  
Vulnerable Options ◽  
Economic Analyses

A new framework for pricing European vulnerable options is developed in the case where the underlying stock price and firm value follow the mixed fractional Brownian motion with jumps, respectively. This research uses the actuarial approach to study the pricing problem of European vulnerable options. An analytic closed-form pricing formula for vulnerable options with jumps is obtained. For the purpose of understanding the pricing model, some properties of this pricing model are discussed in the paper. Finally, we compare and analyze the pricing results of different pricing models and discuss the influences of basic parameters on the pricing results of our proposed model by using numerical simulations, and the corresponding economic analyses about these influences are given.

A Simplified Firm Value-Based Risky Discount Bond Pricing Model

2007 ◽  
Vol 10 (03) ◽  
pp. 445-468 ◽  
Author(s):  
Alan T. Wang ◽  
Sheng-Yung Yang
Keyword(s):  
Firm Value ◽  
Closed Form Solution ◽  
Form Solution ◽  
Credit Spread ◽  
Bond Pricing ◽  
Computational Time ◽  
Pricing Model ◽  
Management Tools ◽  
General Parameter ◽  
Parameter Values

This paper proposes a simplified risky discount bond pricing model based on Longstaff and Schwartz (1995). The advantage of this model is that it yields a closed form solution for probability of default. Also, a practical feature with our model is that computing durations and other risk management tools become computationally less expensive, while the appealing properties in the LS model are preserved. The numerical comparisons show that the differences in credit spreads between this model and Longstaff and Schwartz are within a few basis points for fairly general parameter values. Moreover, the computational time is shown remarkably reduced by the simplified model. Sensitivity analysis of credit spread with respect to different parameter values is presented.

scholarly journals Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management

Risks ◽  
2021 ◽  
Vol 9 (6) ◽  
pp. 105
Author(s):  
Alessandro Gennaro
Keyword(s):  
At Risk ◽  
Simulation Model ◽  
Financial Distress ◽  
Financial Management ◽  
Firm Value ◽  
Default Risk ◽  
Continuous Assessment ◽  
Financial Policies ◽  
Insolvency Risk ◽  
Value Maximization

This conceptual paper focuses on the relationship between insolvency, capital structure, and value creation. The aim is twofold: to define risk-based capital measures able to absorb the effects of financial distress and avoid corporate default; and to verify conditions and limits of use of these measures in corporate financial policies. The capital measures based on insolvency risk will be defined by recalling the concepts of Cash Flow-at-Risk and Capital-at-Risk. A first check on the usefulness of these risk-based measures and their consistency with the principle of value maximization is carried out through a simulation model. The scenario analysis allows us to examine how financial and risk policies oriented by insolvency avoidance affect the firm value. According to evidence from the simulation model, these measures appear to be useful in lowering the default risk, but they require a continuous assessment of their impact on the firm value.

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