In a dynamic framework, the advantage of leverage depends upon the firm's recapitalization policy. We show that if bonds are callable at par, then equityholders have an incentive to recapitalize too early. Call premia and issue discounts, however, mitigate the agency problem of early...

Traditionally portfolios are optimized with the single-regime Markowitz model using the volatility as the risk measure and the historical return as the expected return. This study shows the effects that a regime-switching framework and alternative risk measures (modified value at risk and...

On 19th March 2009, national newspapers in Austria reported on a “turbo scandal” that had been suspected on the Vienna Stock Exchange. Concerned investors argued that the issuers of turbo certificates tried to raid the underlying prices of these down-and-out call options by pushing down the...

On 19th March 2009, several national newspapers in Austria reported on a “turbo scandal” that had been suspected on the Vienna Stock Exchange for several years. Concerned investors argued that the issuers of turbo certificates tried to raid the underlying prices of these down-and-out call...