We address a credit risk model with optimal switching in which a firm optimally switches between two different diffusion regimes. A default boundary and the switching thresholds are endogenously determined, and we examine how the triggers and credit spreads are affected by the differences in...

We propose a model that jointly determines the capital structure and investment decisions taking business cycle and debt maturity into account. Namely, the firm can switch the diffusion regime of asset value, which involves switching costs, and the state of the economy that generates cyclical...

We propose a structural model with an optimal switching of diffusion regime which integrates a wide range of investment reversibility. The default boundary and switching thresholds are endogenously determined, and we can examine conflict of interest between shareholders and creditors from...

We propose a model of a firm's reversible investment decision with macroeconomic conditions based on optimal switching of a diffusion process. The switching costs of a diffusion regime and the cash flow generated by the firm depend on a business cycle which alternates via a Markov chain, and the...

We address a three-period model of fi nancial intermediaries that involves securitization of risky loan assets, leverage, and asymmetric information. We show that the risk retention requirement with a fi xed ratio, stipulated by the Dodd-Frank Act, might induce losses of social welfare in the...

We examine the problem of license contracts in vertically separated markets in which the inventor and the manufacturer bargain over royalties in the presence of probabilistic patents and penalty upon infringement. We show that an excessive protection of patent rights can rather delay the...

We consider an entrepreneur having an option to invest in a project and a potential growth investment option. The two-stage investment costs are financed by secured loans and paid by insurers respectively. We develop explicit models to describe guarantee costs, the timing and pricing of the...

We consider an entrepreneur who has an option to invest in a project and a potential growth investment option. The two-stage investment costs are financed by bank loans guaranteed by an insurer in the first-stage investment and paid by the insurer in the second-stage investment. In return, the...

We consider an entrepreneur who has an option to invest in an irreversible but delayable project. If the project is sufficiently profitable, the firm has an option to make a growth investment, which makes the project cash flow increase by a constant factor. The entrepreneur has no money to...