We analyze the relative advantage of option grants compared to stock compensation when shareholders are diversified. Our analysis recognizes a conflict that is largely neglected in the corporate finance literature. Shareholders want to maximize their portfolio value while capital budgeting rules...

We evaluate the effect of short sale constraint removal on a stock market. The intuition is derived from simple geometry. We show that the price curve as a function of the uncertain future payoff changes when investors are able to act on the belief that the price of the share is relatively high....

We analyze the relative advantage of option grants compared to stock compensation when shareholders are diversified. Our analysis recognizes a conflict that is largely neglected in the corporate finance literature. Shareholders want to maximize their portfolio value while capital budgeting rules...

We evaluate the effect of index option initiation on a stock market in which short sales are prohibited. Our focus is the effect on the price volatility of the underlying asset. In a very simple dynamic model with successive generations of single-period investors, we show that volatility can...

We evaluate the effect of index option initiation on a stock market in which short sales are prohibited. Our focus is the effect on the price volatility of the underlying asset. In a very simple dynamic model with successive generations of single-period investors, we show that volatility can...

We recognize a conflict that is largely neglected in the corporate finance literature. Shareholders want to maximize their portfolio value while capital budgeting rules direct managers to choose projects that maximize firm (equity) value. Managerial stock options can reduce this conflict between...