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Credit insurance and investment: A contingent claims analysis approach

  • Lai, Van Son
  • Soumaré, Issouf

This paper develops a continuous-time contingent claims analysis model to study the impact of credit insurance on investment. We find that under shareholders' wealth maximization, the presence of credit insurance yields high investment relative to the level of investment without credit insurance. We also obtain a U shape relationship between the project debt maturity and its investment size, with more investment undertaken with short and long maturities and less investment with intermediate maturities.

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File URL: http://www.sciencedirect.com/science/article/B6W4W-4YB792N-3/2/7bc669cd9bf80abcd7d9a4aafd469765
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Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 19 (2010)
Issue (Month): 2 (March)
Pages: 98-107

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Handle: RePEc:eee:finana:v:19:y:2010:i:2:p:98-107
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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