We investigate two new types of equity default swaps: an equity-for-guarantee swap (EGS) and an option-for-guarantee swap (OGS). We calculate equilibrium prices for all components of the two swaps. Then we switch to utility-based prices of the entrepreneur's claims. Our analysis shows that under...

This paper aims to clarify how contingent convertible bond (CCB) as a debt financing instrument affects the firm's investment policy, agency cost of debt and capital structure. We consider two different conversion thresholds of CCB: One is endogenous and the other is exogenous. We find that...

This paper studies the pricing, timing and hedging of an American call option written on a non-tradable asset whose mean appreciation rate is not observable but is known to be a Gaussian random variable. Our goal is to analyze the effects of the partial information on investment in the American...

The existing risk measures are developed mainly for financial institutions that are too big to fail. This paper proposes a hedging-based utility risk measure (HBU) customized for individual investors requiring a comprehensive risk assessment for financial products. We show that HBU is a convex...

The existing risk measures are developed mainly for financial institutions that are too big to fail. This paper proposes a hedging-based utility risk measure (HBU) customized for individual investors requiring a comprehensive risk assessment for financial products. We show that HBU is a convex...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...

We consider a firm with assets-in-place and a growth option. There is a funding gap for the expansion investment, which is covered by entering into an equity-for-guarantee swap or fee-for-guarantee swap. We explicitly derive all contingent claim prices with the pricing and timing of the growth...

We study the impact of ambiguity on the pricing and timing of the option to invest. There is a funding gap to undertake the investment, which is covered by entering into an equity-for-guarantee swap (EGS). Our model predicts that the more ambiguity-averse the agents, the less the option value,...

We consider an entrepreneur who has no assets in place but possesses an option to invest in a project incurring a lump-sum investment cost, of which a fraction must be financed by entering into an equity-for-guarantee swap. The entrepreneur is exposed to macroeconomic risk as well as...

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...