We consider a risk-averse entrepreneur who invests in a project with idiosyncratic risk and takes debt financing for diversification benefits. In contrast to the literature, we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the...

The paper considers the option of an investor to invest in a project that generates perpetual cash flows, of which the drift parameter is unobservable. The investor invests in a liquid financial market to partially hedge cash flow risk and estimation risk. We derive two 3-dimensional non-linear...

We consider a borrower who must get a loan from a lender to start a project. The loan is secured by an insurer, who takes the project and the lender's loss at default. The borrower grants the insurer a fraction of the loan (fee-for-guarantee swap, FGS) or of the project's equity...

The recent fast development of machine learning provides new tools to solve challenges in many areas. In finance, average options are popular financial products among corporations, institutional investors, and individual investors for risk management and investment because average options have...

Many SMEs and young entrepreneurs experience financing constraints due to their low credibility and information asymmetry. To this end, a partial guarantee agreement is popular with Chinese entrepreneurs. In this paper, we consider an SME with a funding gap, who wants to invest in a project, of...

We consider a risk-averse entrepreneur who invests in a project with idiosyncratic risk. In contrast to the literature, we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the entrepreneur and so an innovative financial contract, named...