The paper considers the option of an investor to invest in a project that generates perpetual cash flows, of which the drift parameter is unobservable. The investor invests in a liquid financial market to partially hedge cash flow risk and estimation risk. We derive two 3-dimensional non-linear...

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...

This paper studies the pricing, timing and hedging of an American call option written on a non-tradable asset whose mean appreciation rate is not observable but is known to be a Gaussian random variable. Our goal is to analyze the effects of the partial information on investment in the American...

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...