The focus of credit risk analysis has been either on valuation of risky corporate bond and credit spread, or valuation of vulnerable options in separate contexts. There are two main drawbacks associated with existing studies. First, corporate bonds and credit spread are generally analyzed in a...

This study examines the property of liquidity in the option market. Using Ivy DB's OptionMetrics data for the period of January 1, 1996 to December 31, 2004, we establish convincing evidence of commonality in options liquidity. The commonality remains strong even after controlling for the impact...

In this paper, we discuss the application of precipitation contracts by describing several structured precipitation derivatives transactions. We propose, calibrate, and compare three precipitation models: A Gamma distribution, a mixture of exponentials, and kernel density. Based on the data for...

We integrate an agency problem into search theory to study executive compensation in a market equilibrium. A CEO can choose to stay or quit and search after privately observing an idiosyncratic shock to the firm. The market equilibrium endogenizes CEOs' and firms' outside options and captures...

Much of the agency literature focuses on effort-inducing while little attention is paid to the participation constraint. Intuitively, it is important to jointly address both for CEOs. This paper achieves this by developing a dynamic search equilibrium model which allows for quitting if a CEO is...

Does policy uncertainty affect productivity? Policy uncertainty creates delays as firms await new information about prices, costs and other market conditions before committing resources. Such delays can have real consequences on firms’ productivity and corporate decisions. First, we find that...

This paper is a concise introduction of the weather derivatives market. We present a brief survey of the market, describe the main products, and illustrate their usage in risk management. We also discuss the key issues in modeling and valuation. Finally, taking weather derivatives as an...

I examine the effects of return predictability on option prices for the market portfolio in the presence of stochastic volatility and/or stochastic interest rates. The analysis is implemented in an equilibrium framework where a consistent option pricing model is derived with the return...