Vast empirical evidence points to the existence of a negative correlation, named “leverage effect”, between shocks in variance and shocks in returns. We provide a nonparametric theory of leverage estimation in the context of a continuous-time stochastic volatility model with jumps in...

We analyze the optimal capital structure of a bank issuing countercyclical contingent capital, i.e., notes to be converted into common shares in poor macroeconomic conditions. A comparison of the main effects produced by the countercyclical asset with the simple equity-debt capital structure,...

On 3 December EY hosted a SUERF conference on banking reform with Sir Howard Davies, the Chairman of RBS, and Dame Colette Bowe, the Chairman of the Banking Standards Board, as the two keynote speakers. Professor David Miles (Imperial College) gave the SUERF 2015 Annual Lecture on Capital and...

The financial crisis has emphasized the difficulties for financial companies to raise funds through conventional assets. In this environment, hybrid securities are becoming popular. In this paper we study the optimal capital structure of a company issuing a particular type of hybrid security:...