The European and American call options, for which the prices of their underlying asset follow compound Poisson process, are evaluated by a probability method. Formulas that can be used to evaluate the options are obta...The European and American call options, for which the prices of their underlying asset follow compound Poisson process, are evaluated by a probability method. Formulas that can be used to evaluate the options are obtained, which include not only the elements of an option: the price of the call option, the exercise price and the expiration date, but also the riskless interest rate, nevertheless exclude the volatility of the underlying asset. In practice, the evaluated results obtained by these formulas can provide references of making strategic decision for an investor who buys the call option and a company who sells the call option.展开更多
This paper adopts the real options approach to study the decision-making of corporate endogenous bankruptcy and debt reorganization in a risk-neutral framework, while understanding corporate bankruptcy and debt reorga...This paper adopts the real options approach to study the decision-making of corporate endogenous bankruptcy and debt reorganization in a risk-neutral framework, while understanding corporate bankruptcy and debt reorganization as the options held by equity holders and the creditor. After obtaining the values of contingent claims on the corporate assets, the paper analyzes the bankruptcy decisions of different levered corporate. With standard debt contract and under absolute priority rule, the bankruptcy times maximizing the equity value are not consistent with those maximizing the corporate value: the high levered corporate will inefficiently bankrupt early while the low levered corporate will inefficiently bankrupt late. If debt reorganization or creditor concession isn't allowed, liquidation often leads to the loss in value. But if strategic default or deviation from absolute priority rule is allowed, the decision maximizing the equity value will be consistent with that maximizing the corporate value. Debt reorganization has significant economic implication: for high levered corporate or low levered corporate, with debt reorganization or deviation of the absolute priority rule permitted, postponed or hastened bankruptcy can be avoided, hence,the bankruptcy trigger chosen by equity holders to maximize the equity value is efficient decision without value losses.展开更多
文摘The European and American call options, for which the prices of their underlying asset follow compound Poisson process, are evaluated by a probability method. Formulas that can be used to evaluate the options are obtained, which include not only the elements of an option: the price of the call option, the exercise price and the expiration date, but also the riskless interest rate, nevertheless exclude the volatility of the underlying asset. In practice, the evaluated results obtained by these formulas can provide references of making strategic decision for an investor who buys the call option and a company who sells the call option.
文摘This paper adopts the real options approach to study the decision-making of corporate endogenous bankruptcy and debt reorganization in a risk-neutral framework, while understanding corporate bankruptcy and debt reorganization as the options held by equity holders and the creditor. After obtaining the values of contingent claims on the corporate assets, the paper analyzes the bankruptcy decisions of different levered corporate. With standard debt contract and under absolute priority rule, the bankruptcy times maximizing the equity value are not consistent with those maximizing the corporate value: the high levered corporate will inefficiently bankrupt early while the low levered corporate will inefficiently bankrupt late. If debt reorganization or creditor concession isn't allowed, liquidation often leads to the loss in value. But if strategic default or deviation from absolute priority rule is allowed, the decision maximizing the equity value will be consistent with that maximizing the corporate value. Debt reorganization has significant economic implication: for high levered corporate or low levered corporate, with debt reorganization or deviation of the absolute priority rule permitted, postponed or hastened bankruptcy can be avoided, hence,the bankruptcy trigger chosen by equity holders to maximize the equity value is efficient decision without value losses.
