A Stochastic Delay Model for Pricing Corporate Liabilities

<p>We suppose that the price of a firm follows a nonlinear stochastic delay differential equation. We also assume that any claim whose value depends on firm value and time follows a nonlinear stochastic delay differential equation. Using self-financed strategy and replication we are able to derive a random partial differential equation (RPDE) satisfied by any corporate claim whose value is a function of firm value and time. Under specific final and boundary conditions, we solve the RPDE for the debt value and loan guarantees within a single period and homogeneous class of debt. We then analyze the risk structure of a levered firm. We also evaluate loan guarantees in the presence of more than one debt. Furthermore, we perform numerical simulations for specific companies and compare our results with existing models.</p>

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

Open Access Dissertation

Discipline thesis:degree_discipline

Mathematics

Year dc:date.available

2012

Author dc:creator

• Kemajou, Elisabeth

Contributors dc:contributor

• Mohammed, Salah-Eldin

• Corporate Liabilities
• Debt and Loan Guarantees
• Euler Maruyama Scheme
• Finite Difference - Finite Volume
• Pricing
• Stochastic Delay Differential Equations

Repository record dc:identifier

https://opensiuc.lib.siu.edu/dissertations/547

OAI identifier oai:identifier

oai:opensiuc.lib.siu.edu:dissertations-1548