Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry the covariance of income and loan repayments may explain higher household borrowings than in the case without default option. Under ex post information asymmetry and positive...

With a view to providing economic interpretations of temporal changes in Risk-Neutral Probability Distributions (RNPDs), this article estimates RNPDs from option prices, then studies the expected excess returns on a fixed-strategy reference portfolio constructed from RNPD-defined contingent...

This article deals with the integration of taxes into real option-based investment models under risk neutrality and risk averison. It compares the possible approaches dynamic programming and contingent claims analysis to analyze their effects on the optimal investment rules before and after...