Extending the Maturity of a Defaulting Debt — The Longstaff Model Revisited
This paper uses differing objective functions under the Longstaff model (1990) to discuss the strategic choices faced by the creditor when deciding whether to grant maturity extension on a defaulted loan. The results reveal that: (1) it ensures that the return per unit of risk is higher after maturity extension than before; (2) it recognizes that the risk profile of the firm substantially affects the strategic behavior of the creditor; and (3) it demonstrates that the higher the profit sharing percentage the creditor get, the more willing it will be to extend maturity.
Volume (Year): 12 (2009)
Issue (Month): 01 ()
|Contact details of provider:|| Web page: http://www.worldscinet.com/rpbfmp/rpbfmp.shtml |
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:wsi:rpbfmp:v:12:y:2009:i:01:p:125-140. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)
If references are entirely missing, you can add them using this form.