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Firm value, diversified capital assets, and credit risk: towards a theory of default correlation

Titelangaben

Grüne, Lars ; Semmler, Willi ; Bernard, Lucas:
Firm value, diversified capital assets, and credit risk: towards a theory of default correlation.
In: The Journal of Credit Risk. Bd. 3 (2007) Heft 4 . - S. 81-109.
ISSN 1755-9723
DOI: https://doi.org/10.21314/JCR.2007.053

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Abstract

Following the lead of Merton (1974), recent research has focused on the relationship of credit risk to firm value. Although this has usually been done for a single firm, the growth of structured finance, which necessarily involves the correlation between included securities, has spurred interest in the connection between credit-default risk and the dependencies and cross-correlations arising in families of firms. Previous work by Grüne and Semmler (2005), focusing on a single firm, has shown that firm value models, incorporating company-specific endogenous risk premia, imply that exposure to risk does impact asset value. In this paper, we extend these results to study the effects of random shocks to diversied capital assets wherein the shocks are correlated to varying degrees. Thus, we construct a framework within which the effects of correlated shocks to capital assets can be related to the probability of default for the company. The dynamic decision problem of maximizing the present value of a firm faced with stochastic shocks is solved using numerical techniques. Further, the impact of varying dependency structures on the over-all default rate is also explored.

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Publikationsform: Artikel in einer Zeitschrift
Begutachteter Beitrag: Ja
Institutionen der Universität: Fakultäten
Fakultäten > Fakultät für Mathematik, Physik und Informatik > Mathematisches Institut
Fakultäten > Fakultät für Mathematik, Physik und Informatik > Mathematisches Institut > Lehrstuhl Mathematik V (Angewandte Mathematik)
Fakultäten > Fakultät für Mathematik, Physik und Informatik > Mathematisches Institut > Lehrstuhl Mathematik V (Angewandte Mathematik) > Lehrstuhl Mathematik V (Angewandte Mathematik) - Univ.-Prof. Dr. Lars Grüne
Fakultäten > Fakultät für Mathematik, Physik und Informatik
Titel an der UBT entstanden: Ja
Themengebiete aus DDC: 500 Naturwissenschaften und Mathematik
500 Naturwissenschaften und Mathematik > 510 Mathematik
Eingestellt am: 04 Mär 2021 07:18
Letzte Änderung: 03 Sep 2021 05:12
URI: https://eref.uni-bayreuth.de/id/eprint/63643