The pricing of total loss absorption capacity bonds in a jump-diffusion model with regime-switching
研究了在双指数跳扩散与状态转换模型下，总损失吸收能力债券的定价问题，给出了统一显式定价公式，并发现繁荣期最优票息率显著高于衰退期。
In corporate finance, we usually face the problem of pricing a type of asset, of which the cash flow is a linear function of the firm total cash flow up to the first time the latter exits from a given domain when their claimant receives a lump-sum payoff in addition. We call them standard assets. We provide a unified explicit pricing formula for all standard assets in a double-exponential jump-diffusion cash flow model with regime-switching. We explicitly derive prices of corporate securities involving recently introduced Total Loss Absorption Capacity (TLAC) Bonds in the mixed model. Our numerical analysis shows that the optimal coupon rate of TLAC bonds in the boom regime is substantially higher than that in the recession regime; thus, the firm should issue more TLAC bonds in a better economic environment.