This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these...

This paper examines the effects of exclusive dealing contracts offered by an incumbent distributor. The effectiveness of exclusive dealing contracts offered by distributors is quite different from those offered by incumbent manufacturers. The traditional literature has focused solely on...

This paper analyzes the effects of bubbles in an in.nitely-lived agent model of endogenous growth with .nancial frictions and heterogeneous agents. We provide a complete characterization on the relationship between .nancial frictions and the existence of bubbles. Our model predicts that if the...

The relation between productivity level and the mode of organi zation remains on unsolved puzzle in international trade theory. As pointed out by Antras and Helpman (2004), while some studies indicate that low productivity firms choose to outsource, other studies have derived results to the...

The paper examines the impacts of trade and capital movement between North and South, which differ in the quality of financial institution, on the productivity distribution and other characteristics of a financially-dependent industry. We find that financial imperfection causes firm...

This paper explores the relation between the quality of financial institution and asset bubbles. In this paper, we will show that bubbles can improve the macro performance even if the quality of financial institution is very poor and the financial market does not work well. In this sense, the...

This paper examines development processes of a country when the degree of verifiability is endogenously determined. We characterize the development processes rigorously and show that although the efforts for improving of verifiability are important, the income distribution of a country is...

This paper examines the effects of exclusive dealing contracts in a simple model with manufacturers-distributors relations. We consider entrants in both manufacturing and distribution sectors. It is well-known that a potential entry threat is welfare increasing under homogenous price...

When we intend to hire a professional expert, which type of expert should we hire? Although it is sometimes claimed that decisions of experts tend to be conservative, is it optimal to choose a conservative expert? This paper attempts to answer these questions. It will show that a principal...

In this paper, we propose a theoretical model in which a banking crisis (or bank distress) causes declines in the aggregate productivity. When borrowing firms need additional bank loans to continue their businesses, a high probability of bank failure discourages ex ante investments (i.e.,...