We analyze strategic relationships between buyers and sellers in markets with switching costs and dynamic uncertainty by investigating the scenario wherein a representative buyer trades with two foreign sellers located in the same foreign country. We show that, under exchange rate uncertainty,...

We propose a multi-period model to value employee options allowing for the possibility that a risk-averse employee strategically exercises her options over time rather than at a single date. Our results describing the representative employee's option exercise behavior are broadly consistent with...

We develop an arbitrage-free and complete framework to price options on the stocks of firms involved in a merger or acquisition deal allowing for the possibility that the deal might be called off at an intermediate time possibly creating discontinuous impacts on the stock prices. Our model can...

In this paper, we study the problem of European Option Pricing in a market with short-selling constraints and transaction costs having a very general form. We consider two types of proportional costs and a strictly positive fixed cost. We study the problem within the framework of the theory of...

We develop a general equilibrium model of competitive banks to examine the optimal design of bank regulation. There is a continuum of equilibria of the unregulated economy that feature varying relative sizes of the financial and real sectors. The unregulated economy underinvests (overinvests) in...

We develop a dynamic equilibrium model to derive testable time-series and cross-sectional implications for the endogenous relations among ownership concentration, managerial incentives, and asset prices. For a given firm at any date, ownership concentration is positively related to managerial...

We analyze the design and impact of bank regulation using a dynamic structural framework. The optimal regulatory policy combines a target capital requirement, the mitigation of underinvestment, an intervention capital requirement to control inefficient risk-taking, and recapitalization of...

We show how shareholder-debtholder agency conflicts interact with strategic reporting under asymmetric information to influence bank regulation. Relative to a benchmark unregulated economy, higher capital requirements mitigate inefficient asset substitution, but potentially exacerbate under...

This paper characterizes the liquidity discount, the difference between the market value of a large trader's position and its value when liquidated. This discount occurs whenever traders face downward sloping demand curves for shares and execution lags in selling shares. This characterization...

We analyze a continuous-time stochastic control problem that arises in the study of several important issues in financial economics. An agent controls the drift and volatility of a diffusion output process by dynamically selecting one of an arbitrary (but finite) number of projects and the...