Since Black (1976), the source of the stock price volatility smirk has remained a controversy. The volatility smirk is a side effect of agency conflict. An important distinction is that the smirk occurs in the optimum, even after agency conflict has been resolved. The slope of the smirk is found...

We present a new framework for the joint estimation of the default-free government term structure and corporate credit spread curves. By using a data set of liquid, German mark denominated bonds, we show that this yields more realistic spreads than traditionally obtained spread curves that...

See the article in <I>The North American Journal of Economics and Finance</I> (2013). Volume 26(C), pages 217-226.<P> Research papers in empirical finance and financial econometrics are among the most widely cited, downloaded and viewed articles in the discipline of Finance. The special issue presents...</p></i>

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different...

In a circular city model, I consider network design and pricing decisions for asingle fast transport connection that faces competition from a slower but betteraccessible transport mode. To access the fast transport network individuals haveto make complementary trips by slow mode. This fact has...

We develop a method to screen for local cartels. We first test whether there is statistical evidence of clustering of outlets that score high on some characteristic that is consistent with collusive behavior. If so, we determine in a second step the most suspicious regions where further...

We study mergers in a market where N firms sell a homogeneous good and consumers search sequentially to discover prices. The main motivation for such an analysis is that mergers generally affect market prices and thereby, in a search environment, the search behavior of consumers. Endogenous...

This paper studies the incentives to merge in a Bertrand competition model where firms sell differentiatedproducts and consumers search for satisfactory deals. In the pre-merger symmetricequilibrium, the probability that a firm is the next one to be visited by a consumer is equal acrossfirms not...

This paper is the first to examine the effect of minimum price guaranteesin a sequential search model. Minimum price guarantees are notadvertised and only known to consumers when they come to the shop.We show that in such an environment, minimum price guarantees increasethe value of buying the...

See also the article <I>Search Costs, Demand-side Economies, and the Incentives to merge under Bertrand Competition</I> in the 'Rand Journal of Economics'(2013). Volume 44, issue 3, pages 391-424.<P> This paper studies the incentives to merge in a Bertrand competitionmodel where firms sell differentiated...</p></i>