Two hypotheses are considered to explain employee layoffs by corporations: (1) the declining investment opportunities hypothesis; and (2) the efficiency hypothesis. The stock market response to employee layoff announcements is estimated to be negative, which is consistent with the declining...

A discrete time option pricing model is developed to value a mortgage and its embedded prepayment option when the effective life of the mortgage is a random variable with a probability distribution of known parameters. The model can be applied when the borrower's ex ante expectation of his...