In this paper we consider the newsvendor model with real options. We consider a mixed contract where the retailer can order a combination of q units subject to the conditions in a classical newsvendor contract and Q real options on the same items. We provide a closed form solution to this mixed...

Performance sensitive debt (PSD) contracts link a loan's interest rate to a measure of the borrower's credit relevant performance, e.g., if the borrower becomes less credit worthy, the interest rate increases according to a predetermined schedule. We derive and empirically test a pricing model...

In order to incentivize stronger issuer due diligence effort, European and U.S. authorities are amending securitization-related regulations to force issuers to retain an economic interest in the securitization products they issue. The idea is that if loan originators and securitizers have more...

Multinational corporations can shift income into low-tax countries through transfer pricing and debt financing. While most developed countries use thin capitalization rules to limit the extent to which a subsidiary can be financed with internal debt, a number of developing countries do not. In...

This paper surveys tax haven legislation and links the literature on tax havens to the literature on asymmetric information. I argue that the core aim of tax haven legislation is to create private information (secrecy) for the users of tax havens. This leads to moral hazard and transaction costs...

This paper analyzes the claim, made by both academics and by industry insiders, that vessels speed up under conditions of high freight rates and low bunker prices. The rationale for the claim is that a ship should move slowly when high bunker prices make energy cost savings great and when the...

Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in a continuous time model. We consider the version of recursive utility which gives the most unambiguous separation of risk...

We study the recursive model of Epstein and Zin. We use directional derivatives to derive the model, and calibrate to the data of Mehra and Prescott (1985). By assuming that we can view income streams as dividends of some shadow asset, the model is valid if the market portfolio is expanded to...

In this paper we establish a link between probabilistic cost efficiency and bounded rationality in the newsvendor model. This establishes a framework where bounded rationality can be examined rigorously by statistical methods. The paper offers a relatively deep theoretical analysis of...

The analysis of network’s centralities has a high-level significance for many real-world applications. The variety of game and graph theoretical approaches has a paramount purpose to formalize a relative importance of nodes in networks. In this paper we represent an algorithm for the...