Mergers are the combining of two or more firms to create synergies. These synergies may come from various sources such as operational synergies come from economies of scale or financial synergies come from increased value of securities of the firm. There are vast amount of studies analysing operational synergies of mergers. This study analyses the financial ones. This way the dynamics of purely financial synergies can be revealed. Purely financial synergies can be transformed into financial instruments such as securitization. While analysing financial synergies the puzzle of distribution of financial synergies between claimholders is investigated. Previous literature on mergers showed that bondholders may gain more than existing shareholders of the merging firms. This may become rather controversial. A merger may be synergistic but it does not necessarily mean that shareholders¿ wealth will increase. Managers and/or shareholders are the parties making the merger decision. If managers are acting to the best interest of shareholders then they would try to increase shareholders¿ wealth. To solve this problem first the dynamics of mergers were analysed and then new strategies developed and demonstrated to transfer the financial synergies to the shareholders.

Mergers are the combining of two or more firms to create synergies. These synergies may come from various sources such as operational synergies come from economies of scale or financial synergies come from increased value of securities of the firm. There are vast amount of studies analysing operational synergies of mergers. This study analyses the financial ones. This way the dynamics of purely financial synergies can be revealed. Purely financial synergies can be transformed into financial instruments such as securitization. While analysing financial synergies the puzzle of distribution of financial synergies between claimholders is investigated. Previous literature on mergers showed that bondholders may gain more than existing shareholders of the merging firms. This may become rather controversial. A merger may be synergistic but it does not necessarily mean that shareholders' wealth will increase. Managers and/or shareholders are the parties making the merger decision. If managers are acting to the best interest of shareholders then they would try to increase shareholders' wealth. To solve this problem first the dynamics of mergers were analysed and then new strategies developed and demonstrated to transfer the financial synergies to the shareholders.

The paper studies structural credit risk models with incomplete information of the asset value. It is shown that the pricing of typical corporate securities such as equity, corporate bonds or CDSs leads to a nonlinear filtering problem. This problem cannot be tackled with standard techniques as the default time does not have an intensity under full information. We therefore transform the problem to a standard filtering problem for a stopped diffusion process. This problem is analyzed via SPDE results from the filtering literature. In particular we are able to characterize the default intensity under incomplete information in terms of the conditional density of the asset value process. Moreover, we give an explicit description of the dynamics of corporate security prices. Finally, we explain how the model can be applied to the pricing of bond and equity options and we present results from a number of numerical experiments.