In this paper we examine the dependence of option prices in a general jump-diffusion model on the choice of martingale pricing measure. Since the model is incomplete there are many equivalent martingale measures. Each of these measures corresponds to a choice for the market price of diffusion...

This paper considers optimal compensation for a CEO who is entrusted with administering corporate assets honestly. Optimal compensation designs maximize integrity at minimum cost. These designs are very ‘low powered,’ i.e., while specifying a lower bound for performance and...

I address the issue of the 'number' of International Monetary Equilibria that the international finance model of Geanakoplos and Tsomocos (2002) possesses. The mainstream competitive model has locally unique equilibria with respect to the real side of the economy; however, it manifests nominal...

We consider the pricing of a range of volatility derivatives, including volatility and variance swaps. Under risk-neutral valuation we provide closed form formulae for volatility-average and variance swaps for a variety of diffusion and jump-diffusion models for volatility. We describe a general...

It is received financial wisdom that when there is free entry by speculators, it is impossible to generate net profits on publicly available information. In this paper we study a version of the standard Kyle (85) model with endogenous information acquisition and we find that equilibria exist...

Despite the central importance of investors to all IPO theories, relatively little is known about their role in practice. In this paper we survey institutional investors about how they assess IPOs, what information they provide to the investment banking syndicate, and the factors they believe...

Regulation in the UK is undergoing fundamental change. Dissatisfaction with self-regulation and the self-regulatory organizations intensified steadily during the 1990's. The failure of regulation to avert the Maxwell pension collapse and the widespread selling of inappropriate pension policies...

We analyze a market game where traders are heterogeneous with respect to their rationality level and have asymmetric information. The market mechanism results into a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. We provide a...

This paper contains a General Equilibrium model of an economy with Incomplete Markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a Central Bank, a government and a regulator. The model is used to analyse...

The purpose of our work is to explore contagious financial crises. To this end, we use simplified, thus numerically solvable, versions of our general model [Goodhart, Sunirand and Tsomocos (2003)]. The model incorporates heterogeneous agents, banks and endogenous default, thus allowing various...