A Structural Model with Jump Diffusion Processes
Dao, Thi Thanh Binh (2003), A Structural Model with Jump Diffusion Processes, AFFI (Association Française de Finance), 2003-12, Paris, France
TypeCommunication / Conférence
Conference titleAFFI (Association Française de Finance)
MetadataShow full item record
Author(s)Dao, Thi Thanh Binh
Abstract (EN)In this paper, we extend the framework of Leland’s 94 by examining corporate debt, equity and ﬁrm values with jump diﬀfusion processes. We choose two kinds of jumps such as the uniform and double exponential jumps to modelise the distribution of the log jump sizes. By this choice, we are able to derive closed-form results in both models for equity, debt and ﬁrm values. Our results have the same forms as those of Leland’s 94. However, in both our models, the spreads are modiﬁed signiﬁcantly in comparison with those of Leland due to jumps’ assumption.
Subjects / KeywordsEquity debt; Corporate debt; Leland
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