Credit risk and contagion: Continuous-time optimal contract approach
| Project/Area Number |
20730204
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Single-year Grants |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | The University of Tokyo |
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Principal Investigator |
NAKAMURA Hisashi The University of Tokyo, 大学院・経済学研究科, 講師 (80418649)
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| Project Period (FY) |
2008 – 2009
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| Project Status |
Completed (Fiscal Year 2009)
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| Budget Amount *help |
¥4,290,000 (Direct Cost: ¥3,300,000、Indirect Cost: ¥990,000)
Fiscal Year 2009: ¥1,690,000 (Direct Cost: ¥1,300,000、Indirect Cost: ¥390,000)
Fiscal Year 2008: ¥2,600,000 (Direct Cost: ¥2,000,000、Indirect Cost: ¥600,000)
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| Keywords | 信用リスク評価 / 企業再生 / 情報開示 / 信用リスク / 企業再構成 / インパルス制御 / 伝染効果 / 連続時間 |
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| Research Abstract |
This research project studies the role of restructuring in valuing optimally designed long-term securities in a continuous-time model with costly corporate information disclosure. In practice, Merton (1974)'s contingent-claim models have been long used for valuing corporate securities, based mostly on the assumption of some sufficiently complete security structure in markets. On the other hand, in the literature on corporate finance, it has been well known theoretically and empirically that the agency problem (i.e., conflicts of interest among agents) caused by informational asymmetry distorts corporate capital structure. However, the effect of the distortion on security valuation has not been well studied either in theory or in practice. This paper bridges such a gap between the security-valuation literature and the corporate-finance literature. Specifically, first, it shows that, in the agency problem, corporate leverage ratios are higher when restructuring is expected to be accepted in default than otherwise. Also, they can correlate with equity values negatively inter-temporarily. The risk of a jump to liquidation increases the default probability in short term, and decreases the probability of restructuring over time. As a result, this model can resolve the underestimation problem of short-term credit spreads.
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Report
(3 results)
Research Products
(10 results)
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[Presentation]
Organizer
連邦準備理事会
Place of Presentation
米国ワシントンDC
Related Report
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[Presentation]
Organizer
Ajou大学金融工学部
Place of Presentation
韓国スウォン
Related Report
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