search query: @author Carpenter, J. N. / total: 2
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Author: | Acharya, V. V. Carpenter, J. N. |
Title: | Corporate bond valuation and hedging with stochastic interest rates and endogenous bankruptcy |
Journal: | Review of Financial Studies
2002 : WINTER, VOL. 15:5, p. 1355-1383 |
Index terms: | Bonds Interest rates Option valuation Bankruptcy |
Language: | eng |
Abstract: | The paper analyzes corporate bond valuation and optimal call and default rules when interest rates and firm value are stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate bond sensitivity to interest rates and firm value. The authors show that empirical results on the relation between corporate spreads and treasury rates provide evidence on duration, and find that the endogenous model explains the empirical patterns better than do typical exogenous models. |
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