Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 89:
A Framework for Valuing Corporate Securities

Jan Ericsson and Joel Reneby ()

Abstract: We suggest a methodology for valuing corporate securities that allows the straightforward derivation of closed form solutions for complex capital structure scenarios. The tractability of the approach stems from its modularity - we provide a number of intuitive building blocks that are sufficient for valuation in most typical situations. A\ further advantage of our approach is that it makes economic interpretation far easier than what is typically possible with other approaches such as solving partial differential equations. As examples we consider a corporate coupon bond with discrete payments and debt subject to strategic debt service.

Keywords: Barrier contingent claims; corporate securities; (follow links to similar papers)

JEL-Codes: G13; (follow links to similar papers)

25 pages, December 1995, Revised December 3, 1998

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This paper is published as:
Ericsson, Jan and Joel Reneby, (1998), 'A Framework for Valuing Corporate Securities', Applied Mathematical Finance, Vol. 5, pages 143-163

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