English, Article edition: Extending the Maturity of a Defaulting Debt â The Longstaff Model Revisited Shyan Yuan Lee; Yi Fang Chung

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Extending the Maturity of a Defaulting Debt â The Longstaff Model Revisited
Author
  • Shyan Yuan Lee
  • Yi Fang Chung
Physical Description
  • article
Notes
  • This paper uses differing objective functions under the Longstaff model (1990) to discuss the strategic choices faced by the creditor when deciding whether to grant maturity extension on a defaulted loan. The results reveal that: (1) it ensures that the return per unit of risk is higher after maturity extension than before; (2) it recognizes that the risk profile of the firm substantially affects the strategic behavior of the creditor; and (3) it demonstrates that the higher the profit sharing percentage the creditor get, the more willing it will be to extend maturity.
  • Defaulting debt, liquidation cost, maturity extension decisions, optimal extension period, Sharpe ratio, JEL Classification: GG13, JEL Classification: G33
  • RePEc:wsi:rpbfmp:v:12:y:2009:i:01:p:125-140
Language
  • English
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