Evaluation of equity-based debt obligations
Pricing of Securities
2019-01-09 v1
Abstract
We consider a class of participation rights, i.e. obligations issued by a company to investors who are interested in performance-based compensation. Albeit having desirable economic properties equity-based debt obligations (EbDO) pose challenges in accounting and contract pricing. We formulate and solve the associated mathematical problem in a discrete time, as well as a continuous time setting. In the latter case the problem is reduced to a forward-backward stochastic differential equation (FBSDE) and solved using the method of decoupling fields.
Cite
@article{arxiv.1901.02254,
title = {Evaluation of equity-based debt obligations},
author = {Alexander Fromm},
journal= {arXiv preprint arXiv:1901.02254},
year = {2019}
}