Pricing the Gamble for Resurrection and the Consequences of Renegotiation and Debt Design
AbstractThis paper aims at measuring the loss in the value of a firm due to the gamble for resurrection, in a standard contingent claims model. Just before a debt repayment is due, the equityholders of a levered firm can decide to shut the firm down or to keep it as an ongoing concern. We study how leverage affects the operating decision and we provide a closed form formula for the associated agency costs. We show that yield spreads associated with defaultable bonds are higher than those obtained when ignoring the agency conflict.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Toulouse - GREMAQ in its series Papers with number 97.480.
Length: 50 pages
Date of creation: 1997
Date of revision:
Contact details of provider:
Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
Fax: 05 61 22 55 63
Web page: http://www-gremaq.univ-tlse1.fr/
More information through EDIRC
DEBT ; PRICING ; BONDS;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.