theory model that includes an investment choice, we show that firms which are more exposed to debt overhang issue callable … bonds have covenants attached, the firm is more likely to issue callable bonds. Our empirical findings support the theory …

based on introducing stochastic idiosyncratic cash flow risk into an equity valuation model of firms with growth options …. Within our model, a firm's systematic risk depends on the delta of its growth option. The growth option's delta is lower when … idiosyncratic volatility rises, driving down the firm's systematic risk and hence its expected return - firms with higher …

compound option models, a crucial problem is how to deal with the different types of risk. Previous models, such as Cassimon et … option model, but implicitly bundle both commercial and technical risk in one risk measure. We extend this model by … explicitly incorporating technical risk, while still preserving the closed-form solution of the model. As such, this extended …

We analyze how the presence of financial markets effects the optimal exercise of real options for a risk averse agent …. In this process we examine the role of the minimal martingale measure and the Capital Asset Pricing Model (CAPM). Using … martingale measure as the appropriate reference measure, consistent with the CAPM. We provide a characterization of the optimal …

-probability extreme events on environmental policy in a continuous-time real options model with “tail risk”. In a nutshell, our results … indicate the importance of tail risk and call for foresighted pre-emptive climate policies. -- Climate Policy ; Extreme Events …