A dynamic program for valuing corporate securities

作者：Ayadi Mohamed A; Ben Ameur Hatem^*; Fakhfakh Tarek

来源：European Journal of Operational Research, 2016, 249(2): 751-770.

DOI：10.1016/j.ejor.2015.10.026

• Option theory
• Structural models
• Corporate securities
• Corporate bonds
• Dynamic programming

We design and implement a dynamic program for valuing corporate securities, seen as derivatives on a firm's assets, and computing the term structure of yield spreads and default probabilities. Our setting is flexible for it accommodates an extended balance-sheet equality, arbitrary corporate debts, multiple seniority classes, and a reorganization process. This flexibility comes at the expense of a minor loss of efficiency. The analytical approach proposed in the literature is exchanged here for a quasi-analytical approach based on dynamic programming coupled with finite elements. To assess our construction, which shows flexibility and efficiency, we carry out a numerical investigation along with a complete sensitivity analysis.

• 出版日期2016-3-1