This paper calculates carry costs directly and focuses on the effect that carry cost lumpiness has on hedge variables. It shows that carry cost adjusted price changes should be used to reduce errors in the calculated hedge: ratio, profit, and effectiveness. Results demonstrate that the errors...

The paper examines the impact of business group affiliation on cost of loans in an emerging market setting. It focuses on operational strategy, organizational structure and internationalization policies of business group firms and their impact on borrowing cost of affiliated firms. Bank loans...

Among numerical methods for valuing derivatives, lattice- based models like the binomial are useful for pricing American options, but have difficulty with path dependent contracts. Monte Carlo simulation is good for path- dependent problems, but has trouble with American early exercise. And for...

This paper extends Geske's (1979a) compound European call option pricing model and the Roll (1977), Geske (1979b), and Whaley (1981) (RGW) American call pricing model to the case where the variance of the underlying asset changes deterministically. The theoretical analysis shows that the...

We present a tax motivation for the use of employee stock options (ESO) in compensation schemes, based on the advantageous treatment allowed for a firm hedging positions written on its own securities. In a binomial option framework, we show that a cost saving on the order of 10-15% of...