We study probabilities which determine the payo of barrier options:the probability that an asset hits a barrier before maturity, theprobability that the asset is below the barrier at maturity, and theratio of both probabilities. The correct estimation of these probabilitieshas crucial eects on...

This paper shows that preferences alone cannot explain the patterns reported in the literature.

This paper establishes the result that the seller prefers posted-price selling when the cost of information acquisition is high, and auctions when it is low. We view corporate bonds as an instance of the former case, and government bonds as an instance of the latter.

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

We investigate the suitability of securitization as an alternative to reinsurance forthe purpose of transferring natural catastrophe risk. We characterize the conditionsunder which one or the other form of risk transfer dominates using a setting in whichreinsurers and traders in financial...

Using a unique dataset containing separate information on the base andbonus pay of over a million workers, we provide novel evidence on the determinantsand earnings effects of performance pay. Several observables—in particularage, education, tenure, and job complexity—have a large impact on...

In spite of the fact that they can draw on a larger, more liquid and more diversifiedpool of capital than the equity of reinsurance companies, financial markets have failed to displace reinsurance as the primary risk-sharing vehicle for natural catastrophe risk. We show that this failure can be...

Over the period 2002 to 2003, Switzerland and the European Union (EU) were engaged in negotiations regarding banking secrecy. The EU's stated goal was for Switzerland to abolish banking secrecy. Switzerland refused and offered to impose a withholding tax on interest income instead. The two...

When information is costly, a seller may wish to prevent prospective buyers from acquiring information, for the cost of information acquisition is ultimately borne by the seller. A seller can achieve the desired prevention of information acquisition through posted-price selling, by offering...