Within the structural approach for credit risk models we discuss the optimal exercise of the callable and convertible bonds. The Vasiĕk-model is applied to incorporate interest rate risk into the firm’s value process which follows a geometric Brownian motion. Finally, we derive pricing bounds...

We investigate the effect of the ability of \non-traditional" funds to short-sell the equity of their debtors. This enables the funds to vote on the restructuring proposals of distressed firms, while at the same time they separate their voting rights from their economic exposure. The effect on...