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Corporate bond prices and co-ordination failure

Bruche, Max (2003) Corporate bond prices and co-ordination failure. Financial Markets Group Discussion Papers (438). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

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.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.ac.uk
Additional Information: © 2003 The Author
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
Date Deposited: 12 Aug 2009 09:49
Last Modified: 13 Sep 2024 19:50
URI: http://eprints.lse.ac.uk/id/eprint/24825

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