Journal of Financial Economics Vol. 42 No. 3 1996
Leasing and credit risk
Abstract
Despite empirical evidence pointing to a strong similarity between lease contracts and junk bonds, the theoretical modeling of equilibrium lease determination has been confined primarily to default-free leases. This paper provides a unified framework for determining the equilibrium credit spread on leases subject to default risk. The model is flexible enough to be applied to a wide variety of real-world leasing structures, including security deposits, required up-front prepayments, embedded lease options, leases indexed to use, and lease credit insurance contracts.
- DOI
- 10.1016/0304-405x(96)00882-3
- Volume
- 42
- Issue
- 3
- Pages
- 333-364
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex