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Black and Scholes (1973) and Merton (1973, 1974) (hereafter referred to as BSM) introduced the contingent claim approach (CCA) to the valuation of corporate debt and equity. The BSM modeling framework is also named the 'structural' approach to risky debt valuation. The CCA considers all stakeholders of the corporation as holding contingent claims on the assets of the corporation. Each claim holder has different priorities, maturities and conditions for payouts. It is based on the principle that all the assets belong to all the liability holders.The BSM modeling framework gives the basic fundamental version of the structural model where default is assumed to occur when the net asset value of the firm at the maturity of the pure-discount debt becomes negative, i.e., market value of the assets of the firm falls below the face value of the firm's liabilities. In a regime of limited liability, the shareholders of the firm have the option to default on the firm's debt. Equity can be viewed as a European call option on the firm's assets with a strike price equal to the face value of the firm's debt. Actually, CCA can be used to value all the components of the firm's liabilities, equity, warrants, debt, contingent convertible debt, guarantees, etc.In the four volumes we present the major academic research on CCA in corporate finance starting from 1973, with seminal papers of Black and Scholes (1973) and Merton (1973, 1974). Volume I covers the foundation of CCA and contributions on equity valuation. Volume II focuses on corporate debt valuation and the capital structure of the firm. Volume III presents empirical evidence on the valuation of debt instruments as well as applications of the CCA to various financial arrangements. The papers in Volume IV show how to apply the CCA to analyze sovereign credit risk, contingent convertible bonds (CoCos), deposit insurance and loan guarantees. Volume 1: Foundations of CCA and Equity ValuationVolume 1 presents the seminal papers of Black and Scholes (1973) and Merton (1973, 1974). This volume also includes papers that specifically price equity as a call option on the corporation. It introduces warrants, convertible bonds and taxation as contingent claims on the corporation. It highlights the strong relationship between the CCA and the Modigliani-Miller (M&M) Theorems, and the relation to the Capital Assets Pricing Model (CAPM). Volume 2: Corporate Debt Valuation with CCAVolume 2 concentrates on corporate bond valuation by introducing various types of bonds with different covenants as well as introducing various conditions that trigger default. While empirical evidence indicates that the simple Merton's model underestimates the credit spreads, additional risk factors like jumps can be used to resolve it. Volume 3: Empirical Testing and Applications of CCAVolume 3 includes papers that look at issues in corporate finance that can be explained with the CCA approach. These issues include the effect of dividend policy on the valuation of debt and equity, the pricing of employee stock options and many other issues of corporate governance. Volume 4: Contingent Claims Approach for Banks and Sovereign DebtVolume 4 focuses on the application of the contingent claim approach to banks and other financial intermediaries. Regulation of the banking industry led to the creation of new financial securities (e.g., CoCos) and new types of stakeholders (e.g., deposit insurers).
News Professor Cheng-Few Lee ranks #1 based on his publications in the 26 core finance journals, and #163 based on publications in the 7 leading finance journals (Source: Most Prolific Authors in the Finance Literature: 1959-2008 by Jean L Heck and Philip L Cooley (Saint Joseph's University and Trinity University). Market microstructure is the study of how markets operate and how transaction dynamics can affect security price formation and behavior. The impact of microstructure on all areas of finance has been increasingly apparent. Empirical microstructure has opened the door for improved transaction cost measurement, volatility dynamics and even asymmetric information measures, among others. Thus, this field is an important building block towards understanding today's financial markets. One of the pioneers in the field of market microstructure is David K Whitcomb, who retired from Rutgers University in 1999 after 25 years of service. David generously funded the David K Whitcomb Center for Research in Financial Services, located at Rutgers University. The Center organized a conference at Rutgers in his honor. This conference showcased papers and research conducted by the leading luminaries in the field of microstructure and drew a broad and illustrious audience of academicians, practitioners and former students, all who came to pay tribute to David K Whitcomb. Most of the papers in this volume were presented at that conference and the contributions to this volume are a lasting bookmark in microstructure. The coverage of topics on this volume is broad, ranging from the theoretical to empirical, and covering various issues from market architecture to liquidity and volatility.
Bringing together developments from the past 30years in contingent valuation, this book examines the relative value of securities in a corporation's capital structure, including debt of different priorities, convertible debt, common stock, and warrants.
This book contains 17 articles on stochastic processes (stochastic calculus and Malliavin calculus, functionals of Brownian motions and Lévy processes, stochastic control and optimization problems, stochastic numerics, and so on) and their applications to problems in mathematical finance.The proceedings have been selected for coverage in:• Index to Scientific & Technical Proceedings® (ISTP® / ISI Proceedings)• Index to Scientific & Technical Proceedings (ISTP CDROM version / ISI Proceedings)• Index to Social Sciences & Humanities Proceedings® (ISSHP® / ISI Proceedings)• Index to Social Sciences & Humanities Proceedings (ISSHP CDROM version / ISI Proceedings)• CC Proceedings — Engineering & Physical Sciences
Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, labour contracts, and public decisions.
The subject of numerical methods in finance has recently emerged as a new discipline at the intersection of probability theory, finance, and numerical analysis. The methods employed bridge the gap between financial theory and computational practice, and provide solutions for complex problems that are difficult to solve by traditional analytical methods. Although numerical methods in finance have been studied intensively in recent years, many theoretical and practical financial aspects have yet to be explored. This volume presents current research and survey articles focusing on various numerical methods in finance. The book is designed for the academic community and will also serve professional investors.
This book contains 17 articles on stochastic processes (stochastic calculus and Malliavin calculus, functionals of Brownian motions and L(r)vy processes, stochastic control and optimization problems, stochastic numerics, and so on) and their applications to problems in mathematical finance.The proceedings have been selected for coverage in: OCo Index to Scientific & Technical Proceedings- (ISTP- / ISI Proceedings)OCo Index to Scientific & Technical Proceedings (ISTP CDROM version / ISI Proceedings)OCo Index to Social Sciences & Humanities Proceedings- (ISSHP- / ISI Proceedings)OCo Index to Social Sciences & Humanities Proceedings (ISSHP CDROM version / ISI Proceedings)OCo CC Proceedings OCo Engineering & Physical Sciences"
As the title indicates, Essays in Honor of James A. Graaskamp: Ten Years After, is a collection of essays written to honor Graaskamp's major contributions to the field of real estate education and practice over the course of three decades. Upon his death in 1988, the industry lost a major influence for advancing the real estate discipline, both as an academic field and a professional field. The authors in this volume seek to extend Graaskamp's contributions and move the real estate discipline forward. The papers address the challenges posed by the market to return our attention to real estate fundamentals, and to strike a proper balance between Main Street and Wall Street. The authors and editors hope that this book will influence the industry to incorporate many of Grasskamp's ideas into mainstream real estate education and practice. Over the course of his career, Graaskamp made many noteworthy contributions to real estate theory and practice, ideas that if resurrected could offset some of the pressure in the industry to move away from market fundamentals. The authors try to capture the essence of Graaskamp's messages, and intend that the papers serve as a point of departure for discussing the future role and nature of real estate education. Part I focuses on the major contributions to the real estate discipline made by Graaskamp and the Wisconsin Real Estate Program. Part II contains some personal recollections and photos of Graaskamp, and also a summary of the groups that make up the Wisconsin Real Estate Program, a major co-sponsor of this volume. The rest of the book's three main parts are structured around major topics that reflect the multidisciplinary nature of real estate as espoused by Graaskamp. Part III treats real estate feasibility and development, Part IV concentrates on real estate valuation, and Part V discusses institutional economics.