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The Valuation of Corporate Liabilities as Compound Options

Published online by Cambridge University Press:  19 October 2009

Robert Geske
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Extract

This paper applies the technique for valuing compound options to the risky coupon, bond problem. A formula is derived which contains n-dimensional multivariate normal intecjrals. It is shown that, for some compound option problems, the special correlation structure allows an application of an integral reduction which may simplify the numerical evaluation. The effects of various indenture restrictions on the formula are discussed, and a new formula for evaluating subordinated debt is presented.

Type
Proceedings of 1977 Western Finance Association Meeting: Trefetz Paper
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 4 , November 1977 , pp. 541 - 552
Copyright
Copyright © School of Business Administration, University of Washington 1977

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References

REFERENCES

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