and growth opportunities, whereas the managers' pay-forperformance sensitivity remains largely unexplained. Firms with …

dividend protected, i.e. any dividend payout decreases the value of a manager’s options. Empirical evidence shows that this …

associated with higher levels of equity and asset volatility. Consistent with the role of options as a nondebt tax shield, we …

The volatility information content of stock options for individual firms is measured using option prices for 149 U ….S. firms and the S&P 100 index. ARCH and regression models are used to compare volatility forecasts defined by historical stock … returns, at-the-money implied volatilities and model-free volatility expectations for every firm. For one-day-ahead estimation …

We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm’s values … default probability. Our simulation results indicate that the stochastic volatility model tends to predict higher default … probabilities than the corresponding Merton model if a firm’s credit quality is not too low. Otherwise the stochastic volatility …