Contingent Claims Valuation of Corporate Liabilities: Theory and Empirical Tests / E. Philip Jones, Scott P. Mason, Eric Rosenfeld.

Format:

Book

Author/Creator:

Jones, E. Philip.

Contributor:

National Bureau of Economic Research.

Mason, Scott P.

Rosenfeld, Eric.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1143.

NBER working paper series no. w1143

Language:

English

Subjects (All):

Corporations--Finance--Mathematical models.

Corporations.

Mathematical models.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Contingent Claims Valuation of Corporate Liabilities

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Cambridge, Mass. : National Bureau of Economic Research, 1983.

Summary:

Although the Contingent Claims Analysis model has become the premier theory of how value is allocated among claimants on firms,its empirical validity remains an open question. In addition to being of academic interest, a test of the model would have significant practical implications. If it can be established that the model predicts actual market prices, then the model can be used to price new and untraded claims, to infer firm values from prices of traded claims like equity and to price covenants separately. In this paper evidence is presented on how well a model which makes the usual assumptions in the literature does in predicting market prices for claims in standard capital structures. The results suggest that the usual assumption list requires modification before it can serve as a basis for valuing corporate claims.

Notes:

Print version record

June 1983.