Asset Pricing, Capital Structure and Financial Economics: Pricing, Hedging, and Risk
Date
2015-10-02
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Asset Pricing is a central topic in Finance Theory. Explaining why different assets have
different risk premia is a main goal of Asset Pricing Theory.
In this thesis, I explore various topics in Finance Theory, including topics in asset pricing,
capital structure, and financial economics.
Chapter 1 investigates a regime switching Lucas economy in continuous time,
with multiple dividend streams and labor income. We determine the asset prices in equilibrium in
the economy with regime switching, and derive a system of partial differential equations for
the asset prices and the short interest rate.
In Chapter 2, I consider credit risk. Motivated by empirical findings, we propose a
framework using unobservable, underlying Markov chains, to model naturally both frailty
and default contagion. Chapter 3 is subsequent research based on Chapter 2. We consider a reduced-form,
intensity-based credit risk model, which allows for both frailty and default contagion, using
a so-called “self-exciting” intensity, in the sense that the default intensity varies not only
with the risk factors, but also depends on the previous default history of all the firms.
In Chapter 4, we turn our attention to an area that is related to both asset pricing and
corporate finance. We investigate the optimal capital structure of a corporate when the
dynamics of the assets (both growth rate and volatility) change following different states of
the economy. In Chapter 5, we investigate credit risk and the credit spread of a corporate
defaultable bond when the dynamics of the assets change according to different states of the
economy.
In Chapter 6, we investigate a model where the asset price follows hidden Markov
modulated jump-diffusion dynamics. This framework incorporates two important
empirically observed features: jumps and regime shifts.
Description
Keywords
Economics--Finance
Citation
Shen, J. (2015). Asset Pricing, Capital Structure and Financial Economics: Pricing, Hedging, and Risk (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/25032