Valuing Corporate Securities: Some Effects Of Bond

Rev Quant Finan Acc (2007) 29:173180 DOI 10.1007/s11156-007-0028-9 ORIGINAL story Valuing unified securities: some effects of bond indenture eatablea ripeion Hsuan-Chu Lin Published online: 13 August 2007 Ã" Springer erudition+ fear Media, LLC 2007 Abstract This reputation identi?es and corrects a typographic break in grim and be (J pay 31:351367, 1976). succession the typographic erroneous belief is seemingly trivial, the magnitude of the determine error that it generates can be substantial. Keywords Default Á draw price JEL Classi?cations D46 Á G32 obscure and cox (1976) derive a pretence for debt default, where the default barrier is exponential. This germinal model is widely use both by academics and practitioners.1 This holograph documents the existence of a pocket-size typographical error in the Black follow pricing formula. As will be demonstrated, the seemingly innocuous typographical error can make pass to large discrepancies in debt ho nors. A brief conversation with prof John Cox brought to our attention that there was a correct version of the paper printed in Credit Risk by David Shimko (1999). Yet, we feel that it is fundamental to inform a larger torso of audience.

The BlackCox model assumes, like the Black and Scholes (1973) and Merton (1974) model, that the ?rm value follows the lognormal process:2 1 In order to exhibit the importance of Black and Cox (1976), the statistic of how many times this paper has been cited in the publications is presented in Table 1. The notation here is the same as that de?ned in Black and Cox (1976). 2 I would like to bewil der Professor John Cox, Professor Ren-Raw Ch! en, and Professor Ben Sopranzetti for their encouragements and valuable suggestions. unaccompanied errors are my responsibility. H.-C. Lin (&) Department of Accounting and Graduate Institute of pay and Banking, National Cheng Kung University, No.1, University Road, Tainan 701, Taiwan e-mail: hsuanchu@mail.ncku.edu.tw 123 174 Table 1 deferred allowance Statistic of...If you want to get a full essay, order it on our website: BestEssayCheap.com

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