A new framework for firm value using copulas
AbstractIn this paper we present some contingent claim analysisâ€™ models for the firm value. We focus on two different approaches: the structural (Merton) approach and a new one that treats the asset value as a claim on the firmâ€™s securities. The non-observability of the assetsâ€™ value in structural models can be overcome using the bivariate contingent claim analysis and copula theory. First we consider the case of the complete markets followed by the general case of incomplete markets. In the latter we provide the lower and upper bound of the firmâ€™s value, using no-arbitrage arguments
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 58.
Date of creation: 04 Jul 2006
Date of revision:
Firm value; No Arbitrage; Structural models; Bivariate option; Copula; Incomplete Markets;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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