Contingent Claims Valuation of Corporate Liabilities: Theory and Empirical Tests
AbstractAlthough the Contingent Claims Analysis model has become the premier theory of how value is allocated among claimants on firms,its empirical validity remains an open question. In addition to being of academic interest, a test of the model would have significant practical implications. If it can be established that the model predicts actual market prices, then the model can be used to price new and untraded claims, to infer firm values from prices of traded claims like equity and to price covenants separately. In this paper evidence is presented on how well a model which makes the usual assumptions in the literature does in predicting market prices for claims in standard capital structures. The results suggest that the usual assumption list requires modification before it can serve as a basis for valuing corporate claims.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1143.
Date of creation: Jun 1983
Date of revision:
Publication status: published as Jones, Philip E., Scott P. Mason and Eric Rosenfeld. "Contingent Claims Valuation of Corporate Liabilities: Theory and Empirical Tests." Corporate Capital Structures in the United States, edited by Benjamin M. Friedman. Chicago: University of Chicago Press, (1985), pp. 239-261.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
- Parkinson, Michael, 1977. "Option Pricing: The American Put," The Journal of Business, University of Chicago Press, vol. 50(1), pages 21-36, January.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, Elsevier, vol. 7(3), pages 229-263, September.
- Reneby, Joel & Ericsson, Jan, 2001. "The Valuation of Corporate Liabilities: Theory and Tests," Working Paper Series in Economics and Finance 445, Stockholm School of Economics, revised 19 Dec 2002.
- Ericsson, Jan & Jacobs, Kris & Oviedo, Rodolfo, 2009.
"The Determinants of Credit Default Swap Premia,"
Journal of Financial and Quantitative Analysis, Cambridge University Press,
Cambridge University Press, vol. 44(01), pages 109-132, February.
- Jan Ericsson & Kris Jacobs & Rodolfo A. Oviedo, 2004. "The Determinants of Credit Default Swap Premia," CIRANO Working Papers, CIRANO 2004s-55, CIRANO.
- Ericsson, Jan & Jacobs, Kris & Oviedo-Helfenberger, Rodolfo, 2004. "The Determinants of Credit Default Swap Premia," SIFR Research Report Series, Institute for Financial Research 32, Institute for Financial Research.
- Elkamhi, Redouane & Ericsson, Jan & Parsons, Christopher A., 2012. "The cost and timing of financial distress," Journal of Financial Economics, Elsevier, Elsevier, vol. 105(1), pages 62-81.
- Ericsson, Jan & Reneby, Joel, 2003. "Valuing Corporate Liabilities," SIFR Research Report Series, Institute for Financial Research 15, Institute for Financial Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.