search query: @author Varenne, F. de / total: 2
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| Author: | Briys, E. Varenne, F. de |
| Title: | Valuing risky fixed rate debt: an extension |
| Journal: | Journal of Financial and Quantitative Analysis
1997 : JUN, VOL. 32:2, p. 239-248 |
| Index terms: | QUANTITATIVE TECHNIQUES DEBT RISK |
| Language: | eng |
| Abstract: | This paper develops a corporate bond valuation model that takes into account both early default and interest rate risk. It corrects a defect of recent contributions where pricing equations do not assure that the payment to bondholders upon bankruptcy is no greater than firm value. The bankruptcy-triggering mechanism is directly related to the payoff received by bondholders when early bankruptcy is forced upon the firm. More specifically, the default barrier is defined simply as a fixed quantity discounted at the riskless rate up to the maturity date of the risky corporate bond. |
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