Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83456
Authors: 
Dózsa, Martin
Seidler, Jakub
Year of Publication: 
2012
Series/Report no.: 
IES Working Paper 17/2012
Abstract: 
This article presents structural asset pricing model with stochastic interest rate and default barrier based on the evolution of the firm' Earning Before Interest and Taxes (EBIT). This framework is further enhanced by the game theory analysis which examines the negotiation between shareholders and creditors with respect to the debt of the company and its safety covenants serving as the default trigger. As a result, this complex framework allows toanalyse different optimal capital structures of the company and its default probability dependent on the changes in the risk-free interest rate, which may also represent the current state of the economy. As the numerical computations show this approach is more convenient than the constant default barrier framework used in the currently available literature.
Subjects: 
credit contracts
stochastic default barrier
asset pricing
EBIT-based models
structural models
JEL: 
C73
G12
G32
G33
Document Type: 
Working Paper
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