the web's biggest credit risk modeling resource.

Credit Jobs

Home Glossary Links FAQ / About Site Guide Search

Submit Your Paper

In Rememberance: World Trade Center (WTC)

Export citation to:
- Text (plain)
- BibTeX

Geske, Robert, "The Valuation of Corporate Liabilities as Compound Options", Journal of Financial and Quantitative Analysis, Vol. 12, No. 4, (November 1977), pp. 541-552.

Abstract: This paper applies the technique for valuing compound options to the risky coupon bond problem. A formula is derived which contains n-dimensional multivariate normal integerals. It is shown that, for some compound option problems, the special correlation structure allows application of an integral reduction which may simplify the numerical evaluation. The effects of various indenture restrictions on the formula are discussed, and a new formula for evaluating subordinated debt is presented.

Download paper (443K PDF) 12 pages

A Correction :

Geske, Robert and Herbert E. Johnson, "Valuation of Corporate Liabilities as Compound Options: A Correction", Journal of Financial and Quantitative Analysis, Vol. 19, No. 2, (June 1984), pp. 231-232.

Opening Paragraph: Geske derived in [the above paper] expressions for the values of junior and senior debt and equity. In this paper, some confusion about these expressions is cleared up, and an error is corrected. We use the same notation as in [the above paper].