Search results for: structural-models-in-corporate-finance

Structural Models in Corporate Finance

Author : Hayne Leland
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The Oxford Guide to Financial Modeling

Author : Thomas S. Y. Ho
File Size : 65.63 MB
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Presents the financial models of stock and bond options, exotic options, investment-grade and high-yield bonds, convertible bonds, mortgage-backed securities, credit derivatives, liabilities of financial institutions, the business model, and the corporate model. It also describes the applications of the models to corporate finance and relates the models to fair value accounting, enterprise risk management, and asset/liability management with illiquid instruments. Each chapter introduces a practical problem and then the financial models that provide the business solutions.

Dynamic Models and Structural Estimation in Corporate Finance

Author : Ilya A. Strebulaev
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The goals of this monograph are to explain the models and techniques and make it more accessible, introduce the main strands of this literature, and explain how dynamic models can be taken to the data and estimated, providing a guide to 3 methodologies: generalized method of moments, simulated method of moments, and maximum simulated likelihood.

Continuous Time Models in Corporate Finance Banking and Insurance

Author : Santiago Moreno-Bromberg
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Continuous-Time Models in Corporate Finance synthesizes four decades of research to show how stochastic calculus can be used in corporate finance. Combining mathematical rigor with economic intuition, Santiago Moreno-Bromberg and Jean-Charles Rochet analyze corporate decisions such as dividend distribution, the issuance of securities, and capital structure and default. They pay particular attention to financial intermediaries, including banks and insurance companies. The authors begin by recalling the ways that option-pricing techniques can be employed for the pricing of corporate debt and equity. They then present the dynamic model of the trade-off between taxes and bankruptcy costs and derive implications for optimal capital structure. The core chapter introduces the workhorse liquidity-management model—where liquidity and risk management decisions are made in order to minimize the costs of external finance. This model is used to study corporate finance decisions and specific features of banks and insurance companies. The book concludes by presenting the dynamic agency model, where financial frictions stem from the lack of interest alignment between a firm's manager and its financiers. The appendix contains an overview of the main mathematical tools used throughout the book. Requiring some familiarity with stochastic calculus methods, Continuous-Time Models in Corporate Finance will be useful for students, researchers, and professionals who want to develop dynamic models of firms' financial decisions.

Structural Models of Credit Risk are Useful

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World Scientific Reference On Contingent Claims Analysis In Corporate Finance In 4 Volumes

Author : Dan Galai
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Black and Scholes (1973) and Merton (1973, 1974) (hereafter referred to as BSM) introduced the contingent claim approach (CCA) to the valuation of corporate debt and equity. The BSM modeling framework is also named the 'structural' approach to risky debt valuation. The CCA considers all stakeholders of the corporation as holding contingent claims on the assets of the corporation. Each claim holder has different priorities, maturities and conditions for payouts. It is based on the principle that all the assets belong to all the liability holders.The BSM modeling framework gives the basic fundamental version of the structural model where default is assumed to occur when the net asset value of the firm at the maturity of the pure-discount debt becomes negative, i.e., market value of the assets of the firm falls below the face value of the firm's liabilities. In a regime of limited liability, the shareholders of the firm have the option to default on the firm's debt. Equity can be viewed as a European call option on the firm's assets with a strike price equal to the face value of the firm's debt. Actually, CCA can be used to value all the components of the firm's liabilities, equity, warrants, debt, contingent convertible debt, guarantees, etc.In the four volumes we present the major academic research on CCA in corporate finance starting from 1973, with seminal papers of Black and Scholes (1973) and Merton (1973, 1974). Volume I covers the foundation of CCA and contributions on equity valuation. Volume II focuses on corporate debt valuation and the capital structure of the firm. Volume III presents empirical evidence on the valuation of debt instruments as well as applications of the CCA to various financial arrangements. The papers in Volume IV show how to apply the CCA to analyze sovereign credit risk, contingent convertible bonds (CoCos), deposit insurance and loan guarantees. Volume 1: Foundations of CCA and Equity ValuationVolume 1 presents the seminal papers of Black and Scholes (1973) and Merton (1973, 1974). This volume also includes papers that specifically price equity as a call option on the corporation. It introduces warrants, convertible bonds and taxation as contingent claims on the corporation. It highlights the strong relationship between the CCA and the Modigliani-Miller (M&M) Theorems, and the relation to the Capital Assets Pricing Model (CAPM). Volume 2: Corporate Debt Valuation with CCAVolume 2 concentrates on corporate bond valuation by introducing various types of bonds with different covenants as well as introducing various conditions that trigger default. While empirical evidence indicates that the simple Merton's model underestimates the credit spreads, additional risk factors like jumps can be used to resolve it. Volume 3: Empirical Testing and Applications of CCAVolume 3 includes papers that look at issues in corporate finance that can be explained with the CCA approach. These issues include the effect of dividend policy on the valuation of debt and equity, the pricing of employee stock options and many other issues of corporate governance. Volume 4: Contingent Claims Approach for Banks and Sovereign DebtVolume 4 focuses on the application of the contingent claim approach to banks and other financial intermediaries. Regulation of the banking industry led to the creation of new financial securities (e.g., CoCos) and new types of stakeholders (e.g., deposit insurers).

Handbook of Corporate Finance

Author : B. Espen Eckbo
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Judging by the sheer number of papers reviewed in this Handbook, the empirical analysis of firms’ financing and investment decisions—empirical corporate finance—has become a dominant field in financial economics. The growing interest in everything “corporate is fueled by a healthy combination of fundamental theoretical developments and recent widespread access to large transactional data bases. A less scientific—but nevertheless important—source of inspiration is a growing awareness of the important social implications of corporate behavior and governance. This Handbook takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues, ranging from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. The surveys are written by leading empirical researchers that remain active in their respective areas of interest. With few exceptions, the writing style makes the chapters accessible to industry practitioners. For doctoral students and seasoned academics, the surveys offer dense roadmaps into the empirical research landscape and provide suggestions for future work. *The Handbooks in Finance series offers a broad group of outstanding volumes in various areas of finance *Each individual volume in the series should present an accurate self-contained survey of a sub-field of finance *The series is international in scope with contributions from field leaders the world over

Handbook of Empirical Corporate Finance SET

Author : B. Espen Eckbo
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This two-volume set summarizes recent research on corporate decision-making. The first volume covers measurement and theoretical subjects as well as sources of capital, including banks, public offerings, and private investors. In the second volume, contributors focus on the ways corporations are structured and the practices through which they can be bought and sold. Thus, its major subjects include dividends, capital structure, financial distress, takeovers, restructurings, and managerial incentives. *Takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues *Discusses everything from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. *Contributors are leading empirical researchers that remain active in their respective areas of expertise *Writing style makes the chapters accessible to industry practitioners

Corporate Governance and Performance of Peer Firms

Author : Gul Rukh
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Project Report from the year 2014 in the subject Business economics - General, grade: A, , language: English, abstract: In this study we elaborate the effects of corporate governance practices which recently practiced in Pakistani firms and also examine the relationship among corporate governance mechanisms, capital structure, dividend policy and firm performance. Those researchers who could not find significant link between corporate governance and firm performance suggest that good corporate governance has at least indirect effect on performance. This research attempts to prove that corporate governance effects firm performance directly; relatively it exerts its effects on firm performance through other factors such as capital structure decisions and dividend policy. This research study develops a multilevel model linking corporate governance, capital structure, dividend policy and firm performance then proves it through structural equation modeling (SEM). Corporate governance has been measured and conceptualized through Board Size, Board Composition, CEO Duality, Audit Committee Size and Annual General Meetings. Capital structure has been measured through it standardized proxy that is debt to equity ratio, while dividend policy is measured by dividend payout ratio. Firm performance has measured by two ratios return on assets (ROA) and return on equity (ROE) both are used as accounting and financial measure in the literature review.

Dynamic Models and Structural Estimation in Corporate Finance

Author : Ilya A. Strebulaev
File Size : 89.89 MB
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The three goals of Dynamic Models and Structural Estimation in Corporate Finance are (1) to explain the models and techniques used in this literature as simply as possible and make it more accessible, (2) to introduce the reader to the main strands of this literature, and (3) to explain how dynamic models can be taken to the data and estimated with the intent to provide a practical, hands-on guide to three specific methodologies that have been used in the literature: generalized method of moments, simulated method of moments, and maximum simulated likelihood.

Capital Structure and Corporate Financing Decisions

Author : H. Kent Baker
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A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.

Corporate Financial Distress Restructuring and Bankruptcy

Author : Edward I. Altman
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A comprehensive look at the enormous growth and evolution of distressed debt markets, corporate bankruptcy, and credit risk models This Fourth Edition of the most authoritative finance book on the topic updates and expands its discussion of financial distress and bankruptcy, as well as the related topics dealing with leveraged finance, high-yield, and distressed debt markets. It offers state-of-the-art analysis and research on U.S. and international restructurings, applications of distress prediction models in financial and managerial markets, bankruptcy costs, restructuring outcomes, and more.

Corporate Finance

Author : Stefan Cristian Gherghina
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This book comprises 19 papers published in the Special Issue entitled “Corporate Finance”, focused on capital structure (Kedzior et al., 2020; Ntoung et al., 2020; Vintilă et al., 2019), dividend policy (Dragotă and Delcea, 2019; Pinto and Rastogi, 2019) and open-market share repurchase announcements (Ding et al., 2020), risk management (Chen et al., 2020; Nguyen Thanh, 2019; Štefko et al., 2020), financial reporting (Fossung et al., 2020), corporate brand and innovation (Barros et al., 2020; Błach et al., 2020), and corporate governance (Aluchna and Kuszewski, 2020; Dragotă et al.,2020; Gruszczyński, 2020; Kjærland et al., 2020; Koji et al., 2020; Lukason and Camacho-Miñano, 2020; Rashid Khan et al., 2020). It covers a broad range of companies worldwide (Cameroon, China, Estonia, India, Japan, Norway, Poland, Romania, Slovakia, Spain, United States, Vietnam), as well as various industries (heat supply, high-tech, manufacturing).

Evaluation of claims on distressed firms A conceptual framework based on structural models

Author : Elias Fiebig
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Master's Thesis from the year 2017 in the subject Business economics - Investment and Finance, grade: 12/12, Copenhagen Business School (Department of Finance), language: English, abstract: Within this thesis, we develop and apply a comprehensive, yet tractable framework comprising 10 sequential steps for the evaluation of claims on corporations suffering from distress. While traditional industry approaches yield consistent and unbiased valuations for claims on a healthy firm’s assets, we find encumbering evidence that results may be distorted if the valuation object experiences severe financial or economic difficulties. Standard present value, multiple, or accrual based equity valuation methods are deterministic in nature and hence, fail to properly account for the elevated idiosyncratic uncertainties surrounding distress. Initiated by Merton (1974), on the other hand, asset pricing research has suggested structural models as a theoretically superior alternative explicitly incorporating the optionality features and asymmetric payoff-profiles of limited liability claims. However, these models have been rarely adopted by industry professionals for their proclaimed complexity, lack of transparency and stylized assumptions on the valuation object’s capital structure. Accordingly, the proposed framework aims to overcome the above shortcomings of the original Merton (1974) model and eventually allows for an intuitive, seamless pricing of multiple claims with diverse maturity and coupon profiles based on their absolute priority ranking in bankruptcy. First, we provide a thorough characterization of both economic and financial distress and accompanying (firm) characteristics based on which a framework applicability assessment can be performed. Besides, we stress a comprehensive discussion how model input parameters can be estimated reliably. Subsequently, we perform a holistic application of the framework to the distressed German air carrier Air Berlin. Model outputs imply a current market undervaluation of common equity by 52%. While our analysis demonstrates remarkable upsides of the framework compared to traditional valuation procedures, we conclude that a separate estimation of a going concern- and a liquidation value only partially circumvents frictions associated with the computation of a distressed firm’s overall asset value. Moreover, we find that model results are highly sensitive to changes in input factors in general and the expected asset drift rate in particular, implying a considerably low robustness to estimation errors.

Handbook Of Financial Econometrics Mathematics Statistics And Machine Learning In 4 Volumes

Author : Cheng-few Lee
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This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.

Bayesian Theory and Applications

Author : Paul Damien
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The development of hierarchical models and Markov chain Monte Carlo (MCMC) techniques forms one of the most profound advances in Bayesian analysis since the 1970s and provides the basis for advances in virtually all areas of applied and theoretical Bayesian statistics. This volume guides the reader along a statistical journey that begins with the basic structure of Bayesian theory, and then provides details on most of the past and present advances in this field. The book has a unique format. There is an explanatory chapter devoted to each conceptual advance followed by journal-style chapters that provide applications or further advances on the concept. Thus, the volume is both a textbook and a compendium of papers covering a vast range of topics. It is appropriate for a well-informed novice interested in understanding the basic approach, methods and recent applications. Because of its advanced chapters and recent work, it is also appropriate for a more mature reader interested in recent applications and developments, and who may be looking for ideas that could spawn new research. Hence, the audience for this unique book would likely include academicians/practitioners, and could likely be required reading for undergraduate and graduate students in statistics, medicine, engineering, scientific computation, business, psychology, bio-informatics, computational physics, graphical models, neural networks, geosciences, and public policy. The book honours the contributions of Sir Adrian F. M. Smith, one of the seminal Bayesian researchers, with his papers on hierarchical models, sequential Monte Carlo, and Markov chain Monte Carlo and his mentoring of numerous graduate students -the chapters are authored by prominent statisticians influenced by him. Bayesian Theory and Applications should serve the dual purpose of a reference book, and a textbook in Bayesian Statistics.

Corporate Governance Regimes

Author : Joseph McCahery
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This book seeks to examine the relationship between corporate law rules and economic performance. Contributors examine the design of the two main systems of corporate governance to ascertain which bundle of rules is likely to support the emergence of a strong system of governance. They seek to show that the performance of companies is linked to different patterns of shareholding, legal rules, and non-legal relationships.

Risk Assessment and Financial Regulation in Emerging Markets Banking

Author : Aleksandr Markovich Karminskiĭ
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This book describes various approaches in modelling financial risks and compiling ratings. Focusing on emerging markets, it illustrates how risk assessment is performed and analyses the use of machine learning methods for financial risk assessment and measurement. It not only offers readers insights into the differences between emerging and developed markets, but also helps them understand the development of risk management approaches for banks. Highlighting current problems connected with the evaluation and modelling of financial risks in the banking sector of emerging markets, the book presents the methodologies applied to credit and market financial risks and integrated and payment risks, and discusses the outcomes. In addition it explores the systemic risks and innovations in banking and risk management by analyzing the features of risk measurement in emerging countries. Lastly, it demonstrates the aggregation of approaches to financial risk for emerging financial markets, comparing the experiences of various countries, including Russia, Belarus, China and Brazil.

Corporate Finance and Capital Structure

Author : Kentaro Asai
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Capital structure choice is essential for an institution to maximize its value. Because the institution’s decision maker decides how to finance projects before making investment decisions, its financial decisions ultimately affect every aspect of operations thereafter. This book discusses several key theories of corporate capital structure to answer how funding structure shapes an institution’s value. In this book, the author emphasizes the microeconomic foundations of capital structure theory. He shows how various microeconomic frameworks, such as price and game theories, principal–agent model, and mechanism design, can be applied to solve the optimal capital structure of a firm. By getting used to optimizing corporate capital structures subject to various constraints via microeconomic frameworks, readers will become capable of investigating how to finance projects in their own setups. Thus, this book not only informs readers of specific knowledge but also provides them with tools to solve new problems that they will face in their future. This book will be a valuable resource for students of corporate finance at the postgraduate or doctoral level and will serve as the material for professional training aimed at practitioners and regulators with technical expertise.

Swap and other structured products Critical review of recent development as tool in financial risk management applications

Author : Frédérik Arns
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Seminar paper from the year 2006 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: A+, University of Westminster, course: Financial Derivatives, 47 entries in the bibliography, language: English, abstract: The increased volatility in the financial products world has raised concern about new possibilities of Risk Management leading into increased use of structured products. Credit derivatives are financial instruments to manage risk. They isolate such risk from the underlying financial asset. This essay, firstly, is going to examine the impact on swap products as a tool in Risk Management followed by an examination of key areas in structured products development that have experienced the strongest growth in the last decade. For both types, the current theory and pricing will be outlined followed by a demonstration of some characteristic applications in Financial Risk Management.