This book is on option pricing in firm-value-based ("structural") credit risk models. Using modern techniques (change of numeraire) instead of directly solving partial differential equations (the main approach in the literature), closed-form pricing formulae for options on equity can be derived for a range of well-known models from this class. A common feature of these models is the assumption of an exogenously given firm value process, which leads to an endogenous equity (stock) price process. The stock price process depends directly on the firm's capital structure. This allows us not only to study credit risk effects in option prices, but also to investigate option price changes resulting from changes in a firm's capital structure. Numerical results illustrate the implications of our models. Numerous figures and tables allow for an easy comparison of various structural credit risk models.

InhaltsangabeOption Pricing with an Exogenous Stock Price Process Option Pricing with an Endogenous Stock Price Process Exotic Options A Probabilistic, Firm Value Based Security Pricing Framework A Review of Firm Value Based Security Pricing Models from a Probabilistic Perspective Extension of the Probabilistic Security Pricing Framework to Derivative Securities Review of Firm Value Based Pricing Models for Equity Derivates from a Probabilistic Perspective Option Pricing Extensions for Several Classical Capital Structure Models Capital Structure Effects in Option Prices - The Static Case Option Pricing Effects of Changes in a Firm's Capital Structure Conclusions and Directions for Further Research Bibliography