We derive consistent contingent-claims models for valuing implicit options embedded in structured notes, and use them to compare the cost of fixing the spread with that of fixing the price in bond tender offers. We analyze 289 bond tender offers and find that the cost difference is economically...

We compare reactions in the prices and trading patterns of common stocks and closed-end funds (CEFs), which have substantially different investor clienteles, to the September 11, 2001 terrorist attacks. When the market reopened six days later, retail investors sold and there were sharp price...

I extend Akerlof's (1970) adverse selection model, where uninformed participants withdraw from the market, and show that rather than collapse, "lemons" can, and often do, lead to a negative bubble. A mirror image of his model, where uninformed participants pursue "dreams" (for example,...

We investigate the (sell-side) analyst rankings of Institutional Investor (I/I) and The Wall Street Journal (WSJ) using data from 1993-2005. We find that factors with a primary component of recognition are the most important determinants of the rankings, although performance measures are...

This article develops an operationally useful contingent-claims model for valuing employee stock options (ESOs) that takes into account ESO vesting requirements, transfer restrictions, early exercise, and forfeiture. I extend the familiar Black-Scholes-Merton (BSM) model, which most firms use to...

Major European banks are significantly undercapitalized as compared to large American banks, and, more importantly, as compared to the capital levels they would need to survive another severe financial crisis. Bank capital shortfalls in Italy, Spain, Germany, France and the United Kingdom, in...

In this paper, we use a structural credit risk model developed by Geske (1977) and generalized by Chen et al. (2014) to assess the delinquency risk of U.S. Treasury debt implied by U.S. sovereign CDS spreads. We also use the fitted structural model to determine the implied debt ceiling for the...

We investigate the argument that securities frauds are preceded by surprisingly good firm performance but are followed by rapid negative investor response by studying the long-term stock performance of a sample of 430 firms that disclosed securities fraud and experienced class action lawsuits...

Twenty-two states and a consortium of more than 250 private colleges have designed tuition prepayment contracts to help families manage their tuition inflation risk exposure by prepaying the future cost of college. Nine of these states have either suspended enrollments (one temporarily) or...

This paper provides a rationale for the use of convertible securities as the medium of exchange in corporate change-of-control transactions. We argue that convertible securities can resolve the information asymmetry about the bidder's value while at the same time mitigating the information...