Evaluating corporate bonds with complicated liability structures and bond provisions

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• 作者：Chuan-Ju Wang^a ; ¹ ; ^{cjwang@utaipei.edu.tw" class="auth_mail} ; Tian-Shyr Dai^b ; ² ; ^{d88006@csie.ntu.edu.tw" class="auth_mail} ; Yuh-Dauh Lyuu^c ; ³ ; ^{lyuu@csie.ntu.edu.tw" class="auth_mail}
• 关键词：Pricing ; Credit risk ; Structural model ; Default
• 刊名：European Journal of Operational Research
• 出版年：1 September, 2014
• 年：2014
• 卷：237
• 期：2
• 页码：749-757
• 全文大小：673 K

文摘

This paper presents a general and numerically accurate lattice methodology to price risky corporate bonds. It can handle complex default boundaries, discrete payments, various asset sales assumptions, and early redemption provisions for which closed-form solutions are unavailable. Furthermore, it can price a portfolio of bonds that accounts for their complex interaction, whereas traditional approaches can only price each bond individually or a small portfolio of highly simplistic bonds. Because of the generality and accuracy of our method, it is used to investigate how credit spreads are influenced by the bond provisions and the change in a firm鈥檚 liability structure due to bond repayments.