PREFACE: COMPREHENSIVE APPROACH TO CORPORATION FINANCE xi
PART I
THE QUEST FOR OPTIMAL CAPITAL STRUCTURE 1
CHAPTER 1
The Nature of Financial Capital 3
Appendix 1-1: A Brief Introduction to Capital Theory 19
Appendix 1-2: A Review of Basic Option Concepts 26
CHAPTER 2
A Securities Perspective on Capital Structure 36
CHAPTER 3
When Is Capital Structure Irrelevant? 72
CHAPTER 4
Benefits and Costs of Debt and the “Trade-off Theory” of Optimal Capital Structure 85
CHAPTER 5
Asymmetric Information, Adverse Selection, and the “Pecking Order Theory”
of Optimal Capital Structure 116
CHAPTER 6
Distinguishing between Capital Structure Theories 127
CHAPTER 7
Risk and Signaling Capital 133
CHAPTER 8
Regulatory Capital 168
PART II
CAPITAL STRUCTURE AND RISK MANAGEMENT 183
CHAPTER 9
A Vocabulary of Risk 185
CHAPTER 10
Risk Management as a Process 199
CHAPTER 11
Risk Management and Capital Structure 218
PART III
CLASSICAL RISK TRANSFORMATION PRODUCTS 243
CHAPTER 12
Commercial Banking Products 245
CHAPTER 13
Derivatives 263
CHAPTER 14
Asset Disposition and Securitized Products 294
CHAPTER 15
Insurance 311
CHAPTER 16
Reinsurance 333
PART IV
ALTERNATIVE RISK TRANSFER PRODUCTS 349
CHAPTER 17
Alternative Risk Finance vs. Alternative Risk Transfer 351
CHAPTER 18
Alternative Risk Finance: Self-Insurance, Captives, and Captivelike Structures 362
CHAPTER 19
Alternative Risk Finance: Finite Risk Products and Solutions 380
CHAPTER 20
Integrated Multiline and Multitrigger Alternative Risk Transfer Products 401
CHAPTER 21
Committed Capital and Guarantees 427
CHAPTER 22
Alternative Risk Securitizations and Securitized Products 452
PART V
PRACTICAL CONSIDERATIONS FOR WOULD-BE ARTISTS 489
CHAPTER 23
USAA Prime: Choice Cats for Diversifying Investors 491
by Morton N. Lane
CHAPTER 24
Emerging Role of Patent Law in Risk Finance 503
by J. B. Heaton
CHAPTER 25
Weather Derivatives or Insurance? Considerations for Energy Companies 520
by Andrea S. Kramer
CHAPTER 26
Convergence of Insurance and Investment Banking: Representations and
Warranties Insurance and Other Insurance Products Designed to
Facilitate Corporate Transactions 532
by Theodore A. Boundas and Teri Lee Ferro
BIBLIOGRAPHY 545
INDEX 559