We empirically document and theoretically investigate why non-dilutive CoCos are prevalent, even though advocates of CoCos suggest such securities should be dilutive to reduce bank risk-taking. In an agency model with two subsequent moral hazards, we show that while dilutive CoCos deter ex-ante...

We propose a numerical approach for structural estimation of a class of Discrete (Markov) Decision Processes emerging in real options applications. The approach is specifically designed to account for two typical features of aggregate data sets in real options: the endogeneity of firms'...

We propose a binomial lattice approach for valuing options whose payoff depends on multiple state variables following correlated geometric Brownian processes. The proposed approach relies on two main ideas: a transformation of the underlying processes as in the log-transformed binomial lattice...

We develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value. We show that the value of financing flexibility depends on the costs of external financing, the level of corporate and...

This paper provides an introduction to real options, as well as highlighting some important issues that are often neglected by real options analysts. While many books and surveys have been written on real options, there are some ubiquitous concepts that are not well-understood by many authors...

Jordan's initiatives to reduce its energy dependency could have substantial macroeconomic implications, but will crucially depend on the level of international oil prices in the next decade. Significant uncertainties remain regarding the feasibility of the initiatives and their potential fiscal...

This paper studies the impact of bank regulation and taxation in a dynamic model where banks are exposed to credit and liquidity risk and can resolve financial distress in three costly forms: bond issuance, equity issuance or fire sales. We find an inverted U-shaped relationship between capital...