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The Third Workshop on
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Pricing corporate securities with noisy asset information
Thorsten Schmidt
Abstract
We consider the pricing of corporate securities when
investors do not have full information. One approach for this is to
consider a random default boundary, such that even if the firm value
was known, the time of default would not be predictable. On the
other side, in reality investors do not have access to the true firm
value. This is taken into account using an approach which considers
the firm value unobservable and uses noisy information to
obtain a filter problem. The filter problem is solved approximately
and consequences to the pricing of equity and debt are examined.