Download This PaperOn the Valuation and Analysis of Risky Debt: A Theoretical Approach Using a Multivariate Extension of the Merton Model
28 Pages Posted: 16 Sep 2019
Date Written: September 9, 2019
Abstract
We contribute to the literature on the valuation of risky debt by providing three nested multivariate extensions of the standard Merton model. First, we lay forth an approach to pricing risky debt irrespective of its interest payment structure and the specified redemption agreement. Second, we propose a technique for valuing multiple debt instruments within the same firm. Third, we provide an approach for pricing one or more debt instruments with continuous dividend payments.
Keywords: risky debt, debt valuation, debt analysis, expected yield
JEL Classification: G21, G31, G32
Suggested Citation: Suggested Citation
Fischer, Edwin O. and Kampl, Lisa-Maria and Wöckl, Ines, On the Valuation and Analysis of Risky Debt: A Theoretical Approach Using a Multivariate Extension of the Merton Model (September 9, 2019). Available at SSRN: https://ssrn.com/abstract=3450524 or http://dx.doi.org/10.2139/ssrn.3450524
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