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...

Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can always observe all relevant firm information. But all...

The Basel Committee on Banking Supervision (BCBS) (2013) recently proposed shifting the quantitative risk metrics system from Value-at-Risk (VaR) to Expected Shortfall (ES). The BCBS (2013) noted that "a number of weaknesses have been identified with using VaR for determining regulatory capital...

Energy and agricultural commodities and markets have been examined extensively, albeit separately, for a number of years. In the energy literature, the returns, volatility and volatility spillovers (namely, the delayed effect of a returns shock in one asset on the subsequent volatility or...

This paper applies the Hafner and Herwartz (2006) (hereafter HH) approach to the analysis of multivariate GARCH models using volatility impulse response analysis. The data set features ten years of daily returns series for the New York Stock Exchange Index and the FTSE 100 index from the London...

The purpose of the paper is to present the fundamental equation in tourism finance that connects tourism research to empirical finance and financial econometrics. The energy industry, which includes, oil, gas and bio-energy fuels, together with the tourism industry, are two of the most important...

In this paper we introduce flexibility as an economic concept and apply it to the firm’ssecurity issuance decision and capital structure choice. Flexibility is the ability to makedecisions that one thinks are best even when others disagree. The firm’s management valuesflexibility because it...

We develop an economic theory of “flexibility”, which we interpret as the discretion orability to make a decision that others disagree with. We show that flexibility is essentiallyan option for the decisionmaker, and can be valued as such. The value of the flexibilityoption is decreasing in...

This paper provides evidence that keiretsu group member firms are subject to lowereffective tax rates than independent firms in Japan. As one explanation for this phenomenon, wedevelop a hypothesis that keiretsu firms strategically shift financially reported income amongaffiliates in order to...

In this paper we analyze an entrepreneur /manager's choice between private and public ownership in a setting in which management needs some elbow room or autonomy to optimally manage the firm. In public capital markets, the corporate governance regime in place exposes the firm to exogenous...