In this article we use contingent-claim analysis to calculate the effective tax rate (ETR) under corporate debt finance. In particular, we deal with both pure debt and two of the most well-known hybrid securities, i.e., convertible, and reverse convertible bonds. We show that: 1) effective...

The financial crisis has emphasized the difficulties for financial companies to raise funds through conventional liabilities. In this environment, hybrid securities are becoming popular. In this paper we study the optimal capital structure of a company issuing a particular type of hybrid...