This paper aims to clarify how contingent convertible bond (CCB) as a debt financing instrument affects the firm's investment policy, agency cost of debt and capital structure. We consider two different conversion thresholds of CCB: One is endogenous and the other is exogenous. We find that...

We consider an irreversible investment in a project, which generates cash flow following a double exponential jump-diffusion process and its expected return is governed by a continuous-time two-state Markov chain. If the expected return is observable, we present explicit expressions for the...

This paper extends real options theory to consider the situation where the mean appreciation rate of the value of an irreversible investment project is not observable and governed by an Ornstein-Uhlenbeck process. Our main purpose is to analyze the impact of the uncertainty of the mean...

This paper addresses the classical real options problem taking debt renegotiation into account. A critical feature is that equityholders can freely initiate debt renegotiation at most once after debt issuance. We provide explicit solutions of the pricing and timing of the option to start a...