Advances in Financial Leasing Mechanism Designs

Author:

Cananà Lucianna,De Cesare LuigiORCID,Ferrara MassimilianoORCID

Abstract

Financial leasing contracts usually include specific clauses for early termination of the agreement in the event that the lessee defaults. The lessor might, therefore, not immediately ask for termination of the financial lease agreement in order to take advantage of the increment in fees accrued due to the default interest. The analysis presented in this work aims to find the conditions determining the optimal time to rescind the contract, when the arrears’ interest rate is higher than the outstanding fees’ interest rate established in the contract and when the return of alternative investments is deterministic. In this paper, we study the optimal time for advanced termination of a leasing contract to maximize the wealth of the lessor against the natural expiry of the contract. We prove that the optimal time can be found through the intersection of the instantaneous force of interest of a lessor’s credit at a certain date and the instantaneous force of interest of the opportunity cost of capital, or at the initial date or maturity date. To this end, we provide a detailed list of cases in which it is appropriate to terminate the contract or not. The problem is formulated in the case where the opportunity cost follows deterministic and semi-deterministic dynamics.

Publisher

MDPI AG

Subject

General Mathematics,Engineering (miscellaneous),Computer Science (miscellaneous)

Reference14 articles.

1. Nevitt, P.K., and Fabozzi, F.J. (2000). Equipment Leasing, John Wiley & Sons.

2. Castagnoli, E., Cigola, M., and Peccati, L. (2013). Financial Calculus: With Applications, EGEA.

3. Valuation of financial lease contracts: A note;Franks;J. Financ.,1978

4. Valuation of financial lease contracts;Myers;J. Financ.,1976

5. Pricing the credit risk of secured debt and financial leasing;Realdon;J. Bus. Financ. Account.,2006

Cited by 2 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Modeling financial leasing by optimal stopping approach;Decisions in Economics and Finance;2024-01-22

2. A reduced-form model for lease contract valuation with embedded options;Review of Quantitative Finance and Accounting;2023-11-10

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3