Present value of firm in case of correlated defaults
In this article, the valuation of firm’s present value in case of correlated defaults is studied. We showed that the valuation of portfolio credit risk can be interpreted as a valuation of the multiple contingent option. In this article, some results for valuation of multiple contingent options are...
Saved in:
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Vilnius University Press
2023-09-01
|
| Series: | Lietuvos Matematikos Rinkinys |
| Subjects: | |
| Online Access: | https://www.zurnalai.vu.lt/LMR/article/view/30731 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1823857935863775232 |
|---|---|
| author | Mantas Valužis |
| author_facet | Mantas Valužis |
| author_sort | Mantas Valužis |
| collection | DOAJ |
| description |
In this article, the valuation of firm’s present value in case of correlated defaults is studied. We showed that the valuation of portfolio credit risk can be interpreted as a valuation of the multiple contingent option. In this article, some results for valuation of multiple contingent options are generalized in case of stochastic barriers and the financial interpretation is given. Also, the modelling of other financial risks, notably, the market risk (the change of debt value) and the operational risk (the adequacy of selected credibility criteria) are included in these theorems. Using the principle of conservatism in credit risk assessment, the debtor credibility, the debt value and the firm value are assumed to follow geometric Wiener process.
|
| format | Article |
| id | doaj-art-ca7f8e11ba9844f6a4b010a90b8f687b |
| institution | Kabale University |
| issn | 0132-2818 2335-898X |
| language | English |
| publishDate | 2023-09-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Lietuvos Matematikos Rinkinys |
| spelling | doaj-art-ca7f8e11ba9844f6a4b010a90b8f687b2025-02-11T18:12:35ZengVilnius University PressLietuvos Matematikos Rinkinys0132-28182335-898X2023-09-0146spec.10.15388/LMR.2006.30731Present value of firm in case of correlated defaultsMantas Valužis0Vilnius University In this article, the valuation of firm’s present value in case of correlated defaults is studied. We showed that the valuation of portfolio credit risk can be interpreted as a valuation of the multiple contingent option. In this article, some results for valuation of multiple contingent options are generalized in case of stochastic barriers and the financial interpretation is given. Also, the modelling of other financial risks, notably, the market risk (the change of debt value) and the operational risk (the adequacy of selected credibility criteria) are included in these theorems. Using the principle of conservatism in credit risk assessment, the debtor credibility, the debt value and the firm value are assumed to follow geometric Wiener process. https://www.zurnalai.vu.lt/LMR/article/view/30731credit riskdefault correlationcontingent option |
| spellingShingle | Mantas Valužis Present value of firm in case of correlated defaults Lietuvos Matematikos Rinkinys credit risk default correlation contingent option |
| title | Present value of firm in case of correlated defaults |
| title_full | Present value of firm in case of correlated defaults |
| title_fullStr | Present value of firm in case of correlated defaults |
| title_full_unstemmed | Present value of firm in case of correlated defaults |
| title_short | Present value of firm in case of correlated defaults |
| title_sort | present value of firm in case of correlated defaults |
| topic | credit risk default correlation contingent option |
| url | https://www.zurnalai.vu.lt/LMR/article/view/30731 |
| work_keys_str_mv | AT mantasvaluzis presentvalueoffirmincaseofcorrelateddefaults |