Operating and stock return results imply that managers that commit fraud likely anticipate large stock price declines if they do not misreport earnings. Stock price declines cause greater losses for managerial stockholdings than for option holdings because of differences in payoff convexity....

Index options have been one of the most successful of the many innovative financial instruments introduced over the last few decades, as their high trading volume indicates. Given their prominence, the pricing efficiency of these markets is of great importance. ; Detecting inefficient pricing,...

This paper examines pricing in the market for depositary receipts, securities designed to track the performance of a stock index that trade like shares of stock. Arbitrage costs are low because these assets have low fundamental risk, low transactions costs, and high dividend yields. We find that...

Researchers have reported mispricing in index options markets. This study further examines the efficiency of the S&P 500 index options market by testing theoretical pricing relationships implied by no-arbitrage conditions. The effect of a traded stock basket, Standard and Poor's Depository...

Researchers have reported mispricing in index options markets. This study further examines the efficiency of the S&P 500 index options market by testing theoretical pricing relationships implied by no-arbitrage conditions. The effect of a traded stock basket, Standard and Poor's Depository...

Index options have been one of the most successful of the many innovative financial instruments introduced over the last few decades, as their high trading volume indicates. Given their prominence, the pricing efficiency of these markets is of great importance. ; Detecting inefficient pricing,...

We identify a flaw in the widely used binomial option pricing model due to the way dividend yield is incorporated into the binomial tree structure. One consequence of the flaw is that the binomial model calculates very different prices for pairs of European spot and futures options even though...

Traditional stock option grant is the most common form of incentive pay in executive compensation. Applying a principal-agent analysis, we find this common practice suboptimal and firms are better off linking incentive pay to average stock prices. Holding the cost of the option grant to the firm...

Existing research examines the impact of volatility shocks on the relative pricing of long-term vs. short-term options and documents patterns of short-horizon underreaction and long-horizon overreaction in the options market. These studies, however, rely on implied volatilities derived from...