Firm and corporate bond valuation: A simulation dynamic programming approach

Research output: Contribution to journalArticlepeer-review


This paper analyzes corporate bond valuation of a straight bond, and the convertibility feature, when interest rates are stochastic and the firm value is determined by the interaction of a series of stochastic variables. The sensitivity of the corporate debt value to some key parameters is also explored. The methodology applied here is based on a hybrid of simulation and dynamic programming proposed by Raymar and Zwecher in 1997 to value financial American-type options. This methodology proves to be extremely efficient to value American-type options when the sources of uncertainty are numerous.

Original languageEnglish
Pages (from-to)345-360
Number of pages16
JournalCuadernos de Economia - Latin American Journal of Economics
Issue number124
StatePublished - 2004
Externally publishedYes


  • Bond
  • Equity
  • Options
  • Valuation


Dive into the research topics of 'Firm and corporate bond valuation: A simulation dynamic programming approach'. Together they form a unique fingerprint.

Cite this