Title: Evaluation of equity-based debt obligations,
Abstract: We consider a class of participation rights, i.e. obligations issued by a
company to investors who are interested in performance-based compensation.
Albeit having desirable economic properties equity-based debt obligations
(EbDO) pose challenges in accounting and contract pricing. We formulate and
solve the associated mathematical problem in a discrete time, as well as a
continuous time setting. In the latter case the problem is reduced to a
forward-backward stochastic differential equation (FBSDE) and solved using the
method of decoupling fields.