An asymmetric jump-diffusion model of stock price behavior is proposed. In an extension of Merton's (1976), we posit that returns dynamics are determined by a drift component, a Wiener process and two jump processes representing the arrival of quot;goodquot; or quot;badquot; news that lead to...

The double exponential jump-diffusion (DEJD) model, recently proposed by Kou (2002) and Ramezani amp; Zeng (1998), generates a highly skewed and leptokurtic distribution and is capable of matching key features of stock and index returns. Moreover, DEJD leads to tractable pricing formulas for...

Associating corporate performance and shareholder value creation with growth in earnings (or sales) has been the modus operandi in the investment industry. It has greatly influenced managerial compensation schemes and portfolio decisions. We shed light on the relationship between growth and...

In the presence of uncertainty and irreversibility, dynamic decision problems should not be solved using expected net present value analysis. The right to delay a decision can be valuable. We show that the value of this right equals Arrow and Fisher's [K. J. Arrow and A. C. Fisher, Environmental...

Associating corporate performance and shareholder value creation to growth in earnings (or sales) has been the modus operandi in the investment industry, greatly influencing managerial compensation schemes and portfolio decisions. This paper sheds light on the relationship between growth and...

Multiple peril insurance schemes (e.g., revenue and earnings insurance) provide protection against adverse movements in several named risks. Their indemnity payoff function resembles that of exotic options with complex contingencies. In this paper we show how the option-based pricing techniques...

Purpose – A large body of empirical literature has identified the key drivers of corporate cash holdings. The extant literature posits that the existence of real options significantly influences a firm's demand for liquidity. The literature, however, has relied on indirect proxies to assess...