Banks and other financial institutions raise hybrid capital as part of their risk capital. Hybrid capital has no maturity, but, similarily to most corporate debt, includes an embedded issuer's call option. To obtain acceptance as risk capital, the first possible exercise date of the embedded...

Dual holders own debt and equity in the same firm. By maximizing the total value of the dual holders' assets, we derive optimal default policies and show that dual holdership reduces default risk. We analyze the two most common priority structures: 1) Dual holders' private debt rank junior to...