We study the dynamics of initial public offerings (IPOs) by examining the tradeoff between an entrepreneur's private benefits, which are lost whenever the firm is publicly traded, and the gains from diversification. We characterize the timing dimension of the decision to go public and its impact...

Empirical investigations of the agency costs of dispersed ownership yield mixed results. A possible explanation for the lack of conclusive evidence is inaccurate measurement of the extent of the problem. We suggest that the extent of the problem be measured as theory suggests: by the wealth...

Israelis commonly hold substantial foreign currency balances at home. This paper examines the phenomenon of these "closet dollars." We show that closet dollars are attractive only if there exists a positive probability that domestic deposits will pay negative dollar rates of return. If such...

We adapt the Benninga-Helmantel-Sarig (2005) framework to value employee stock options (ESOs). The model quantifies non-diversification effects, is computationally simple, and provides an endogenous explanation of ESO early-exercise. Using a proprietary dataset of ESO exercise events we measure...

We consider equilibrium option pricing in a simple two-period economy that is characterized by heterogeneity among agents. We demonstrate that an economy in which agents have constant yet heterogeneous degrees of relative risk aversion will price assets as though it has a single quot;pricing...

This paper examines two issues which are not addressed or have caused some confusion in the hedging literature. We first derive general conditions under which forward and/or put unbiasedness occurs. Contrary to the traditional belief that unbiasedness occurs under risk-neutrality only, we show...

The uncertainty premium is the premium that is derived from not knowing the sure outcome (risk premium) and from not knowing the precise odds of outcomes (ambiguity premium). We generalize Pratt's risk premium to uncertainty premium based on Klibanoff, Marinacci and Mukerji (2005) smooth model...

In this paper we discuss the significant computational simplification that occurs when option pricing is approached through the change of numeraire technique. The original impetus was a recently published paper (Hoang, Powell, Shi 1999) on endowment options; in the present paper we extend these...

The paper presents a method for calculating the cost of equity capital for the non-marketable securities of private firms and its difference from the cost of equity capital of an all else equal public firm (the private firm premium). The method is based on a theoretical framework that assumes...