This paper develops a structural model for defaultable bonds in a fuzzy environment. The numerical results calculated from the closed-form solution show that the fuzziness of the stochastic underlying asset and of bankruptcy costs have material impact on the term structures of credit spreads and on the duration of

We examine the effects of a recent change to the US tax code that reduced the costs lenders incur when restructuring loans out of court (Regulation TD9599). The regulation contemplated particular types of loans, allowing us to use a triple-differences approach to identify the degree to which borrowers are differentially affected by the shift in restructuring costs. We model these changes and sh...

Bankruptcy is a highly significant worldwide problem with high social costs. Traditional bankruptcy risk models have been criticized for falling short with respect to bankruptcy theory building due to either modeling assumptions or model complexity. Genetic programming minimizes the amount of a priori structure that is associated with traditional functional forms and statistical selection proce...

General financial models have become workhorse models in the fields of macroeconomics and finance. These models have been developed and extensively studied by general equilibrium theorists. What makes them so applicable for macroeconomics and finance is the well accepted fact that models with a representative agent and without financial frictions yield equilibrium outcomes that are inconsistent...

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According to existing dynamic capital structure trade off theories equity holders never find it in their best interest to reduce debt voluntarily before bankruptcy or without renegotiating with creditors. This paper develops a model in which firms optimize the maturity structure of debt to commit to future downward restructurings. It is demonstrated that equityholders of firms with short-term d...

Does an entrepreneur-friendly bankruptcy law encourage more entrepreneurship development at a societal level? How does bankruptcy law affect entrepreneurship development around the world? Drawing on a real options perspective, we argue that if bankrupt entrepreneurs are excessively punished for failure, they may pass potentially high-return but inherently high-risk opportunities. Amassing a lon...