Since employee stock option grants have some features that do not fulfill the Black-Scholes assumptions, we use a severance incorporating model to capture its main properties that specify the price and reload condition. Generally, the employee is exposed to various severance risks such as...

“Mine is a long and sad tale”, said the Mouse, turning to Alice and sighing. “It is a long tail certainly,” said Alice, looking down with wonder at the Mouse's tail; “but why do you call it sad?” And she kept on puzzling about it while the mouse was speaking … Financial risk...

This paper investigates whether including a corporate governance factor in the Fama and French three-factor model helps explain stock returns. By constructing a broad corporate governance index (CGI) for Brazilian public firms, this paper documents that governance does explain average returns on...

The goal of this paper is to examine the importance of permanent and transitory shocks in explaining variations in stock prices for Singapore, Taiwan, and South Korea using a trend-cycle decomposition technique. This study is novel in that in measuring the impact of shocks we not only impose...

New perspectives on consumption-based asset pricing models have recently been argued to provide powerful insights for explaining the cross-sectional variation of expected returns. In this paper, we employ both Spanish and U.S. capital markets data to present further evidence on these new...

We propose an approach to the estimation of the parameters of stochastic discount factor (SDF) models which is based on the idea that the next period joint distribution of the variables in a SDF and asset returns can be well approximated by their joint historical distribution. The estimates of...

This paper investigates the dynamics of stocks in the S&P 500 index for the last 30 years. Using a stochastic geometry technique, we investigate the evolution of the market space and define a new measure for that purpose that is a robust index of the dynamics of the market structure and provides...

Turbo warrants have experienced huge growth since they first appeared in late 2001. In some European countries, buying and selling turbo warrants constitutes 50% of all derivative trading nowadays. In Asia, the Hong Kong Exchange and Clearing Limited (HKEx) introduced the callable bull/bear...

Modigliani and Miller show that, in perfect capital markets, the optimal investment decisions of a firm are not affected by how these investments are financed. Miller and Modigliani further imply that, under the assumption of perfect capital markets, a firm's investment decisions are not...

The credit risk capital requirements within the current Basel II Accord are based on the asymptotic single risk factor (ASRF) approach. The asset correlation parameter, defined as an obligor's sensitivity to the ASRF, is a key driver within this approach, and its average values for different...