Corporate Asset Pricing Models and Debt Contracts

41 Pages Posted: 13 Aug 2015 Last revised: 14 Aug 2015

See all articles by Martin Dòzsa

Martin Dòzsa

Charles University

Karel Janda

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: August 1, 2015

Abstract

In the past decades financial markets rapidly gained on complexity due to an increased demand for risk diversification and hedging. A number of sophisticated instruments was developed that capture various aspects of price movements, correlations of assets, macro-economic developments, and other changes that might affect the future income generated by the considered securities. The pricing of these securities was not sufficiently accurate using the traditional asset pricing models. In the search for new methods two different approaches appeared. One stream of literature (called the reduced-form approach) focused on finding a purely mathematical way of asset pricing, without the effort of finding any economical intuition behind the models. In contrast, the other group of academics studied the firm and its evolution. These, so-called structural models have an intuitive connection to the underlying economics, and therefore they can be helpful in understanding the reasons of price movements. This work fits in the category of structural approaches.

Suggested Citation

Dòzsa, Martin and Janda, Karel, Corporate Asset Pricing Models and Debt Contracts (August 1, 2015). CAMA Working Paper No. 33/2015, Available at SSRN: https://ssrn.com/abstract=2642609 or http://dx.doi.org/10.2139/ssrn.2642609

Martin Dòzsa

Charles University ( email )

Opletalova 26
Praha 1, 11000
Czech Republic

Karel Janda (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic
+422 240 05 223 (Phone)
+422 242 11 374 (Fax)

HOME PAGE: http://www.cerge-ei.cz

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