Many U.S. corporate bonds are either callable or convertible. While callable bonds provide a higher coupon to bondholders in exchange for a firm's repurchase option of its claim, convertible bonds offer investors the option to exchange a firm's debt to equity. This paper analyzes the choice...

The determinants of the leverage of firms are widely used as a means to study optimal capital structure decisions. However, empirical studies do not agree on the importance of several commonly proposed determinants. We provide a dynamic capital structure model which endogenously generates the...