While the literature appeals to efficiency arguments from agency theory to explain the relative rise of CEO equity compensation, prior work has given less focus to CEO pay contracts based on equity and cash incentives that directly (analytically) maximize the total return of firm owners. The...

We examine whether pay differentials between the chief executive officer (CEO) and vice presidents (VPs) can be explained by firms’ strategic priorities. We find that firms that pursue prospector-type strategies have a larger CEO−VP difference in equity compensation. We argue that such a pay...

We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity...

We use option prices to test if monetary policy has a significant impact on stock market participants' expectations. We find that, with loose monetary policy, traded equity put (call) options are significantly cheaper (more expensive) versus tight monetary policy. Higher call option prices...

We show that much of the profitability in equity option return strategies, that try to capture option mis-pricing by taking exposure to underlying volatility, can be explained by an IPCA model. The alpha reduction, relative to competing static factor models, is between 50% and 75% depending on...

The increasing adoption of Digital Assets (DAs), such as Bitcoin (BTC), rises the need for accurate option pricing models. Yet, existing methodologies fail to cope with the volatile nature of the emerging DAs. Many models have been proposed to address the unorthodox market dynamics and frequent...

This paper analyzes the accounting behavior of firms whose single stock futures are listed in the Korea Exchange (KRX) derivatives market. We find that firms have higher financial reporting quality and more disclosures after single stocks are listed in the future market. Our findings provide...

Mutual fund managers' compensation packages often contain relative performance-dependent components such as year-end bonus. We examine the incentive effect of such compensation structure using a dynamic trading model with uncertain expected return and costly information. We show that relative...