Buying Put Options to Insure Against Bankruptcy
The Journal of Financial Engineering, Vol. 6, No. 4, December 1997
Posted: 19 May 1998
This research shows how firms can issue put options on their own stock to insure against bankruptcy. The analysis demonstrates that equity put options are far cheaper than alternative methods of reducing the chance of bankruptcy. Potential agency problems associated with such puts are discussed and addressed.
JEL Classification: G13, G33
Suggested Citation: Suggested Citation