This paper studies the interaction between a single long-lived principal and a series of short-lived agents in the presence of both moral hazard and adverse selection. We assume that the principal can influence the agents' behavior only through her choice of a retention rule; this rule is further...

Empirical anamolies in the Black-Scholes model have been widely documented in the Finance literature. Pattern in these anamolies (for instance, the behavior of the volatility smile or of unconditional returns at different maturities) have also been widely documented. Theoretical efforts in the...

This paper develops a framework for modelling risky debt and valuing credit derivatives that is flexible

Recent empirical work has documented the tendency of corporations to reset strike prices on previously-awarded executive stock option grants when declining stock prices have pushed these options out-of-the-money. This practice has been criticized as counter-productive since it weakens incentives...

The Investment Advisers Act of 1940 (as amended in 1970) prohibits mutual funds in the US from offering their advisers asymmetric "incentive fee" contracts in which the advises are rewarded for superior performance via-a-vis a chosen index but are not correspondingly penalized for underforming...

Existing regulations require fee structures used to compensate advisers in the mutual fund industry to be the "fulcrum" variety, decreasing for underperforming a given index in the same way in which they increase for outperforming it. In this paper, we offer a new model for analysing the mutual...

This paper examines the practice of resetting of the terms of previously-issued executive stock options. We identify the properties of the typical reset option, characterize the firms that have reset options, and develop a model to value options that may be reset. In our sample of 396 executives...

Recent work has suggested that strategic underperformance of debt-service obligations by equity holders can resolve the gap between observed yield spreads and those generated by Merton (1974)-style models.(...)