Tax Bond Creation Using a Structural Model and its Extensions

Abstract

This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of bond (Tax Normalization Guarantee) for companies, which would allow them to enter in temporary tax breaks to allow them to free capital. Finally it is explored a way to structure these bonds in financial products and valuate them.