BUSI 4502 Study Guide - Final Guide: Corporate Finance, Financial Transaction, Agency Cost
30 Aug 2018
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Financial engineering in corporate finance john d. finnerty. This article discuss regarding the overview and process of financial. According to john finnerty, financial engineering involves the design, the development, and he implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance1. There are three types of activities that define the corporate financial engineering: securities innovation, corporate financial engineering, which involves the development of innovative financial process, creative solutions to corporate finance problems. The main factor for financial innovation is due to tax and regulatory. Looking at the securities innovation, there are two criteria of truly innovated securities are listed as below. Investor realize higher after tax risk adjusted rate of return. The advantage of debt innovation includes risk reallocation/ yield reduction, reduce agency cost, reduce issuance expenses and also tax arbitrage. This allows the investor to have lower investment risk while investing in the financial markets.
