We provide an easy-to-use model that values derivatives for a privately informed agent. We introduce private forward prices that conveniently format private information for inclusion in a standard no-arbitrage framework. This framework yields simple expressions for the privately-informed value...

We derive a general expression for the value of information to a price-taking investor in a dynamic environment and provide a framework for its estimation. We study the value of both private and public information and break it down into its instrumental and psychic parts. To illustrate, we...

The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...

In empirical tests guided by recent theory (e.g., Hughes, Liu and Liu 2007; and Lambert, Leuz and Verrecchia 2011), we examine the joint effects of information precision, information asymmetry and the level of market competition on firms' cost of equity capital. Consistent with theory, we find that...

This paper investigates whether the business press serves as an information intermediary. The press potentially shapes firms' information environments by packaging and disseminating information, as well as by creating new information through journalism activities. We find that greater press...

The owner of a real option does not have the necessary expertise to manage the investment project and needs to contract with an expert in order to exercise the real option. The potential managers (the experts) have private information about their respective cost of investing in the project. The...

I develop a noisy rational expectations equilibrium model with a continuum of states and a full set of options that render the market complete. I show a major difference in equilibrium behaviour between models with constant absolute risk aversion (CARA) and non-CARA preferences. First, when...

In order to share risk, protection buyers trade derivatives with protection sellers. Protection sellers' actions affect the riskiness of their assets, which can create counterparty risk. Because these actions are unobservable, moral hazard limits risk sharing. To mitigate this problem, privately...

Financial executives of firms engaged in forward contracting have raised concerns that mandated disclosure of those contracts would reveal proprietary information to rival firms. This paper considers the basis for those concerns in the framework of a duopoly in which one privately informed...

During the last years issues of strategic management accounting have received widespread attention in the accounting literature. Yet the conceptual foundation of most proposals is not clear. This paper presents a theoretical analysis of one of the most prominent approaches of strategic...