We consider a risk-averse entrepreneur who invests in a project with idiosyncratic risk and takes debt financing for diversification benefits. In contrast to the literature, we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the...

We study an equilibrium pricing of a new invented equity-for-guarantee swap and optimal capital structure of a firm, which enters into the swap. We present closed-form corporate security prices and guarantee cost, the percentage of the firm's equity allocated by the firm/borrower to an insurer...

This paper utilizes a real options and game-theoretic approach to consider the strategic real investment in a duopoly market under uncertainty with time-inconsistent preferences resulting from quasi-hyperbolic discounting. We show that the time-consistent agent becomes the leader when s/he...

We develop a continuous-time evolutionary market model where prices are endogenously generated by supply and demand. Investment strategies are assumed to be fix-mix, which means that the relative budget shares are constant in time. The model is therefore a hybrid. While given portfolio rules...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...

This paper introduces a new form of contingent capital, contingent convertible securities (CCSs), which might repeatedly convert between debt- and equity-like instruments depending on financial conditions. We derive explicit prices of corporate securities, assuming the cash flow is modeled as a...

We examine a new type of contingent capital, called contingent convertible security (CCS), when the asset value of the issuing firm follows a jump-diffusion process. The merit of CCS is that it can dynamically adjust capital structure almost without incurring adjustment costs. We obtain...

We assume an entrepreneur (borrower) must borrow money from a lender (bank) to start a project in a single-period model. The debt is secured by an insurer who takes the project and pays the lender all the outstanding principal and interest in case of default. The borrower grants the insurer a...

We extend the classical compound Poisson risk model to consider the distribution of the maximum surplus before ruin where the claim sizes depend on inter-claim times via the Farlie-Gumbel-Morgenstern copula. We derive an integro-differential equation with certain boundary conditions for this...

We consider a firm's investment and financing decisions made by a group of which each individual may utilize different discount rates to price cash flow generated by the investment project. We show that a higher degree of decreasing impatience or a greater group diversity increases the project...