We consider the utility-based pricing of corporate securities and optimal capital structure including contingent convertible bond (CCB). We derive the semi-closed-form solutions of the implied values of corporate securities without bankruptcy costs and taxes. Our numerical simulations show that...

We study an equilibrium pricing of a new invented equity-for-guarantee swap and optimal capital structure of a firm, which enters into the swap. We present closed-form corporate security prices and guarantee cost, the percentage of the firm's equity allocated by the firm/borrower to an insurer...

This paper introduces a new form of contingent capital, contingent convertible securities (CCSs), which might repeatedly convert between debt- and equity-like instruments depending on financial conditions. We derive explicit prices of corporate securities, assuming the cash flow is modeled as a...

The equity-for-guarantee swap (EGS) is a new popular financial derivative. We derive closed-form solutions for the interaction of the optimal investment and financing with the swap in a real-options framework. We find that there is an U-shaped relationship between investment timing and the...

This paper finds that a newly created equity-for-guarantee swap can significantly increase a firm’s value. If the firm earns more/less in a recession/boom market, the guarantee cost will decrease. The greater the business risk is, the more the guarantee cost will decrease and the higher the...