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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

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Type
Communication / Conférence
Date
2003
Titre du colloque
AFFI (Association Française de Finance)
Date du colloque
2003-12
Ville du colloque
Paris
Pays du colloque
France
Métadonnées
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Auteur(s)
Dao, Thi Thanh Binh
Résumé (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.
Mots-clés
Equity debt; Corporate debt; Leland
JEL
G3 - Corporate Finance and Governance