Callable Contingent Capital: Valuation and Default Risk
提出保险公司可随时赎回的或有资本设计，证明其不影响高级债券违约风险，为“大而不倒”银行提供审慎资本结构替代方案。
This paper proposes the use of contingent capital with a call provision, in which the insurer has an option to redeem the contingent capital at any time. I characterize in detail a unique dynamic equilibrium of common stock, subordinated contingent capital, and a senior standard bond under a simple yet sufficient and necessary condition that can be implemented easily. I further show that the issuance of callable contingent capital does not affect the default risk of an outstanding senior standard bond. As a result, callable contingent capital provides an alternative design for contingent capital using a prudential capital structure for a bank that is “too big to fail.” This paper was accepted by Jerome Detemple, finance.