An empirical investigation of U.S. firms in reorganization

Article Abstract:

The purpose of this paper is to understand the institutional features of Chapter 11 from an empirical examination of thirty firms that have emerged from reorganization. We find the recontracting framework of Chapter 11 to be complex, lengthy, and costly. Violations of absolute priority in favor of stockholders are frequently encountered. These deviations may result from the bargaining process of Chapter 11 or from a recontracting process between creditors and stockholders which recognizes the ability of stockholder-oriented management to preserve firm value. An example of such recontracting addresses Myers' underinvestment problem. An investigation of the effects of Chapter 11 on the pricing of risky debt is also provided. (Reprinted by permission of the publisher.)

Corporate reorganizations, Bankruptcy

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Prepayment and the valuation of mortgage-backed securities

Article Abstract:

This paper puts forward a valuation framework for mortgage-backed securities. Rather than imposing an optimal, value-minimizing call condition, we assume at each point in time there exists a probability of prepaying; this conditional probability depends upon the prevailing state of the economy. To implement our valuation procedure, we use maximum-likelihood techniques to estimate a prepayment function in light of recent aggregate GNMA prepayment experience. By integrating this empirical prepayment function into our valuation framework, we provide a complete model to value mortgage-backed securities. (Reprinted by permission of the publisher.)

Debt prepayment

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The valuation of complex derivatives by major investment firms: empirical evidence

Article Abstract:

This article examines the auction of a portfolio of collateralized mortgage obligations (CMOs) to major broker dealers and institutional investors. The unique data set allows us to analyze a number of important empirical questions related to the valuation of CMOs by the bidders and the elasticity of demand for the securities. The results reveal that the valuations differ substantially implying a significant elasticity of demand. (Reprinted by permission of the publisher.)

Derivatives (Financial instruments), Institutional investments

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