In this paper we solve the problem of determining the default time of a firm in such a way as to maximize its total value, which includes bankruptcy costs and tax benefits, with the condition that the value of equity must be nonnegative. By applying dynamic programming in discrete time, we find results which extends those of Leland (1994) and Leland-Toff (1996).

Optimal default boundary in a discrete time setting

VARGIOLU, TIZIANO
2001

Abstract

In this paper we solve the problem of determining the default time of a firm in such a way as to maximize its total value, which includes bankruptcy costs and tax benefits, with the condition that the value of equity must be nonnegative. By applying dynamic programming in discrete time, we find results which extends those of Leland (1994) and Leland-Toff (1996).
2001
Proceedings of the Conference on Mathematical Finance, University of Konstanz
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11577/1374174
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