A Commodity Linked Bond as an Optimal Debt Instrument in the Presence of Moral Hazard (Classic Reprint) - Softcover

Inhaltsangabe

How commodity linked debt can align incentives and raise firm value

This book examines how tying debt to commodity prices can solve moral hazard and improve financing for real assets. It explains, with a clear model, how a commodity linked bond can change management behavior and boost the value of a firm compared with traditional fixed‑rate debt.

Delving into a simplified mining example, the text shows how equity incentives interact with debt to shape abandonment decisions, cash flows, and the overall worth of the company. It also compares methods for valuing debt and equity when real assets, risk, and managerial choices are interdependent.

- See how to replicate a mine’s risky cash flows with futures and riskless bonds to find the right value under different strategies
- Learn why abandonment timing under moral hazard can shift the firm’s value and affect equity returns
- Compare commodity linked debt with fixed rate debt and understand how debt structure can change incentives
- Learn how to adjust traditional contingent claims techniques to reflect the impact of liabilities on managerial decisions

Ideal for readers of corporate finance, risk management, and financing real assets seeking a practical view of how debt design influences behavior and value.

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