Credit insurance and investment: A contingent claims analysis approach

Van Son Lai and Issouf Soumaré

International Review of Financial Analysis, 2010, vol. 19, issue 2, 98-107

Abstract: This paper develops a continuous-time contingent claims analysis model to study the impact of credit insurance on investment. We find that under shareholders' wealth maximization, the presence of credit insurance yields high investment relative to the level of investment without credit insurance. We also obtain a U shape relationship between the project debt maturity and its investment size, with more investment undertaken with short and long maturities and less investment with intermediate maturities.

Keywords: Credit; insurance; Financial; guarantees; Investment; incentives (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:19:y:2010:i:2:p:98-107

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