Resource title

Corporate bond prices and co-ordination failure

Resource image

image for OpenScout resource :: Corporate bond prices and co-ordination failure

Resource description

It has been suggested (Morris, Shin 2001) that co-ordination failure between holders of debt can affect the price of debt. In essence, fear of premature foreclosure by other debtors can lead to preemptive action, affecting the value of debt. Using a continuous-time framework related to a Merton (1974)-type structural model, this paper demonstrates how such co-ordination failures can affect the prices of corporate bonds. As it turns out, the resulting model is version of a structural model that allows default before maturity, a model feature that has proven to be popular with practitioners.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://eprints.lse.ac.uk/24825/1/dp438.pdf

Resource license