Accounting-Based Valuation with Changing Interest Rates

Rural Financial Trends: How Are Lenders and Interest Rates Changing?

In recent history, it looked to many as if rural financial markets would become dominated by large banks that offered relatively expensive credit to agricultural firms. However, the 1990's have seen a resurgence in smaller banks with a focus on smaller, agricultural producer loans. Moreover, small banks may be more competitive than ever with respect to interest rates. This report outlines some ...

The Changing Behavior of the Term Structure of Interest Rates*

We reexamine the expectations theory of the term structure using data a t the short end of the maturity spectrum. We find that prior to the founding of the Federal Reserve System in 1915, the spread between long rates and short rates has substantial predictive power for the path of interest rates; after 1915, however, the spread contains much less predictive power. We then show that the short r...

Convertible bonds valuation in a jump diffusion setting with stochastic interest rates

The Valuation of American Options with Stochastic Interest Rates: A Generalization of the Geske-Johnson Technique

The Geske-Johnson approach provides an e cient and intuitively appealing technique for the valuation and hedging of American-style contingent claims. Here, we generalize their approach to a stochastic-interest-rate economy. The method is implemented using options exercisable on one of a nite number of dates. We illustrate how the value of an American-style option increases with interest-rate vo...

Corporate Bond Valuation and Hedging with Stochastic Interest Rates and Endogenous Bankruptcy

This paper analyzes corporate bond valuation and optimal call and default rules when interest rates and firm value are stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate bond sensitivity to interest rates and firm value. Although endogenous and exogenous bankruptcy models can be calibrated to produce the same prices,...