A Framework for Valuing Corporate Securities

Posted: 11 Mar 1999

See all articles by Jan Ericsson

Jan Ericsson

McGill University; Swedish Institute for Financial Research (SIFR)

Joel Reneby

Stockholm School of Economics - Department of Finance

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Abstract

We suggest a methodology for valuing corporate securities that allows the straightforward derivation of closed form solutions for complex capital structure scenarios. The tractability of the approach stems from its modularity - we provide a number of intuitive building blocks that are sufficient for valuation in most typical situations. A further advantage of our approach is that it makes economic interpretation far easier than what is typically possible with other approaches such as solving partial differential equations. As examples we consider a corporate coupon bond with discrete payments and debt subject to strategic debt service.

JEL Classification: G13, G32

Suggested Citation

Ericsson, Jan and Reneby, Joel, A Framework for Valuing Corporate Securities. Available at SSRN: https://ssrn.com/abstract=140989

Jan Ericsson (Contact Author)

McGill University ( email )

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Swedish Institute for Financial Research (SIFR)

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SE-113 59 Stockholm, SE-113 60
Sweden

Joel Reneby

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden
+46 8 7369143 (Phone)
+46 8 312327 (Fax)

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