Market imperfections, investment flexibility, and default spreads

Deskripsi

This paper develope a structural model that determines default spreads in a setting where the debt's collateral is endogenously determined by the borrower's investment choice, and a demand variable with permanent and temporary components. We also consider the possibility that the borrower cannot commit to taking the value maximizing investment choice, and may, in addition, be constarined in its ability to raise external capital. .Printed Journal