We study the valuation of callable barrier reverse convertible contracts written on one or two underlying asset prices. We assume the issuer of the contract can call early redemption at any time during a pre-specified time interval. We identify the optimal redemption policy and show, in the...

We analyze recently proposed mortgage contracts that aim to eliminate selective borrower default when the loan balance exceeds the house price (the ``underwater'' effect). We show contracts that automatically reduce the outstanding balance in the event of house price decline remove the default...

We study the optimal timing strategies for trading a mean-reverting price process with a finite deadline to enter and a separate finite deadline to exit the market. The price process is modeled by a diffusion with an affine drift that encapsulates a number of well-known models, including the...

We derive a simple integral equation for the default probability over a finite time horizon of a company that makes coupon payments on its debt and infrequently returns to its leverage target by increasing its debt unless it defaults on its debt. Compared to the conventional (constant default...

We examine investments in power generation projects under policy uncertainty, when the investor has the choice between two alternative technologies, a gas-fired plant and a wind plant. Increased risk of subsidy withdrawal reduces the payoff from and postpones investments in the wind technology....

We show that the interplay between endogenous limited participation and credit lines creates asset price bubbles in a simple exchange economy with three types of agents: regular stockholders, arbitrageurs and liquidity providers. Regular stockholders are worse off in the economy with credit...

We examine the decision problem of a power producer contemplating an upgrade of its current generation capacity based on a fossil fuel technology (gas plant), when price processes have affine drift and differentiable volatility functions. The operator can choose the best of four mutually...