IDEAS home Printed from https://ideas.repec.org/p/tky/fseres/2006cf421.html
   My bibliography  Save this paper

A Continuous-Time Analysis of Optimal Defaultable Debt Contracts: Theory and Applications

Author

Listed:
  • Hisashi Nakamura

    (Faculty of Economics, University of Tokyo)

Abstract

This paper presents a new approach for modeling continuous-time defaultable debt contracts. It studies an optimal competitive debt contract in continuous time by exploring a dynamic costly monitoring model under asymmetric information in a common-agency setting. It shows that, under an optimal debt contract, a fully informed debtor defaults strategically and recurrently. On the other hand, a less informed creditor expects default to occur stochastically based on an exponential probability distribution under which the arrival rate of default is increasing in monitoring ability. This paper provides a mathematically tractable framework to analyze firms' financial structure and dynamic auditing problems in labor and insurance contracts.

Suggested Citation

  • Hisashi Nakamura, 2006. "A Continuous-Time Analysis of Optimal Defaultable Debt Contracts: Theory and Applications," CIRJE F-Series CIRJE-F-421, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2006cf421
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below 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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2006cf421. 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: (CIRJE administrative office). General contact details of provider: http://edirc.repec.org/data/ritokjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.