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Strategic analysis of contingent claims

Anderson, Ronald W., Sundaresan, Suresh and Tychon, Pierre (1996) Strategic analysis of contingent claims. European Economic Review, 40 (3-5). pp. 871-881. ISSN 0014-2921

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Identification Number: 10.1016/0014-2921(95)00097-6


Traditional contingent claims analysis provides an elegant and complete model of the financing of the dynamic firm but has difficulty fitting the observations in the market. Recent work in corporate finance suggests this is because of its failure to model financial distress realistically. We survey recent efforts to address this issue by deriving valuation formulae from the analysis of non-cooperative equilibria in extensive form games. We illustrate how a simple static bankruptcy model can be incorporated in a dynamic game. We then show how to find the continuous time equivalent of this game. This we use to find closed-form bond formulae in special cases and to exploit efficient numerical techniques generally.

Item Type: Article
Official URL:
Additional Information: © 1996 Elsevier Science B.V.
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 09 Nov 2011 13:50
Last Modified: 20 Feb 2021 03:20

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