Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-Rate and Inflation Risks

This paper provides a joint quantitative analysis of capital structure decisions and debt structure decisions within a standard continuous-time capital-structure model.

Author(s):

Lionel Martellini

Professor of finance at EDHEC Business School and scientific director of EDHEC-Risk Institute.

Vincent Milhau

Senior research engineer, EDHEC-Risk Institute

In the presence of interest rate and inflation risks, we are able to obtain quasiclosed form expressions for the price of various forms of indexed- and non-indexed bonds issued by the firm, which allows us to generate computationally efficient estimates for the optimal debt structure. Our analysis shows that debt-structure decisions have a strong impact on capital structure decisions. It also suggests that substantial increases in firm value can be generated by optimal debt structures.
Pdf
Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-R...
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Type: EDHEC Publication
Date: le 28/03/2011
Extra information : For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.
Research Cluster : Finance

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