We provide experimental evidence that nonbinding preplay communication between bidders in auctions of shares facilitates the adoption of equilibrium strategies: cohesive strategies in uniform-price auctions, and the unique equilibrium in undominated strategies in discriminatory auctions. When...

We develop a simple robust link between deep out-of-the-money American put options on a company's stock and a credit insurance contract on the company's bond. We assume that the stock price stays above a barrier B before default but drops below a lower barrier A after default, thus generating a...

We propose a direct and robust method for quantifying the variance risk premium on financial assets. We show that the risk-neutral expected value of return variance, also known as the variance swap rate, is well approximated by the value of a particular portfolio of options. We propose to use...