In their article "An Arbitrage-Free Approach to Quasi-Option Value" [J.Environm. Econom. Management 35, 103-125, 1998], Coggins and Ramezani interpreted the concept of quasi-option value introduced by Arrow and Fisher [Quart. J. Econom. 88, 1974, 312-319] as being identical to Dixit and...

In the presence of uncertainty and irreversibility, dynamic decision problems should not be solved using expected net present value analysis. The right to delay a decision can be valuable. We show that the value of this right equals Arrow and Fishers (1974) quasi-option value. In a discrete...

The 1996 Farm Bill (FAIR) dramatically changed agricultural policy for producers of many commodities. A series of 7 annual decoupled payments replaced the deficiency-payment program. Option-pricing techniques are used to determine whether program benefits to corn producers are smaller or larger...

We posit that firms with valuable real options have higher demand for cash and liquid assets and propose a simple procedure for identifying firms with valuable real options. Our procedure assumes that, all else being equal, a firm's real options are more valuable when their underlying volatility...

An asymmetric jump-diffusion model of stock price behavior is proposed. In an extension of Merton's (1976), we posit that returns dynamics are determined by a drift component, a Wiener process and two jump processes representing the arrival of quot;goodquot; or quot;badquot; news that lead to...

The double exponential jump-diffusion (DEJD) model, recently proposed by Kou (2002) and Ramezani amp; Zeng (1998), generates a highly skewed and leptokurtic distribution and is capable of matching key features of stock and index returns. Moreover, DEJD leads to tractable pricing formulas for...

We study the impact of realized equity premium and stock market volatility on aggregate gamblingexpenditures. We expect the wealth effect of higher realized returns will increase gambling (enter-tainment good), but also attract gamblers to equity markets, lowering aggregate wagers. Similarly,we...

Associating corporate performance and shareholder value creation to growth in earnings (or sales) has been the modus operandi in the investment industry, greatly influencing managerial compensation schemes and portfolio decisions. This paper sheds light on the relationship between growth and...

Multiple peril insurance schemes (e.g., revenue and earnings insurance) provide protection against adverse movements in several named risks. Their indemnity payoff function resembles that of exotic options with complex contingencies. In this paper we show how the option-based pricing techniques...

The hypothesis that asset returns are log-normally distributed has been widely rejected. The extant literature has shown that empirical asset returns are highly skewed and leptokurtic (fat tails). The Affine Jump-Diffusion (AJD) model improves upon the log-normal specification by adding a jump...