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Record Nr. |
UNINA9910817193103321 |
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Autore |
Galai Dan |
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Titolo |
Credit risk spreads in local and foreign currencies / / prepared by Dan Galai and Zvi Wiener |
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Pubbl/distr/stampa |
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[Washington D.C.], : International Monetary Fund, 2009 |
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ISBN |
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1-4623-2752-4 |
1-4527-1980-2 |
1-4518-7257-7 |
9786612843259 |
1-282-84325-7 |
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Edizione |
[1st ed.] |
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Descrizione fisica |
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1 online resource (22 p.) |
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Collana |
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IMF working paper ; ; WP/09/110 |
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Altri autori (Persone) |
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Disciplina |
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Soggetti |
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Credit - Mathematical models |
Financial risk management |
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Lingua di pubblicazione |
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Formato |
Materiale a stampa |
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Livello bibliografico |
Monografia |
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Note generali |
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Description based upon print version of record. |
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Nota di bibliografia |
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Includes bibliographical references. |
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Nota di contenuto |
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Contents; I. Introduction; II. The Model; III. Numerical Examples and Illustrations; Tables; 1. The Euro-Denominated Debt Spread, Face Value, PD, and the Cost of Credit Risk as a Function of Correlations; IV. Credit Spreads and Modigliani and Miller Propositions; Figures; 1. Spreads on Foreign-Currency Bonds and Correlations; 2. Betas of Stocks and Foreign Currency Bonds for Various Correlations; 2. The Expected Return on Stock (yS) as a Function of the B/S Ratio; V. Implications and Conclusions; 3. The Expected Return on Stock yS as a Function of the B/S Ratio and Correlation Coefficient ρ |
4. FE as a Function of FAppendixes; I. Determination of the Face Value of Debt in the Foreign Currency; 5. FE as a Function of F; II. Firm Value, Exchange Rates, and Inflation; References |
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Sommario/riassunto |
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The paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the return on the company's assets, even if the company is not an exporter. Prudential regulations should therefore |
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