Reset clauses on the strike price and maturity date are commonly found in derivative contracts, like insurance segregated funds, bonds and executive warrants. We analyze the optimal reset policy adopted by the holder of an option that possesses the reset rights on the strike price and date of...

In response to how they are compensated, mutual fund managers who are under-performing by mid-year are likely to increase the risk of their portfolios towards the year-end. We argue that an increase in the liquidity of the stocks that managers use to shift risk can lead to an increase in the...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal...

Most existing portfolio choice models ignore periodic market closure and the fact that market volatility is significantly higher during trading periods. We show that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies...

The reload provision in an employee stock option entitles its holder to receive one new (reload) option from the employer for each share tendered as payment of strike upon the exercise of the stock option. The number of reloads allowed can be finite or infinite. The shout feature in a call...

A knock-in American option under a trigger clause is an option contract in which the option holder receives an American option conditional on the underlying asset price breaching certain trigger level (or called barrier level). We present closed form valuation formulas for knock-in American...

We are concerned with numerical solutions for the continuous-time portfolio selection with proportional transaction costs which is described as a singular stochastic control problem. The associated value function is governed by a variational inequality with gradient constraints. We propose a...

We develop a singular stochastic control model for pricing variable annuities with the guaranteed minimum withdrawal benefit. This benefit promises to return the entire initial investment, with withdrawals spread over the term of the contract, irrespective of the market performance of the...

Entrepreneurs face significant non-diversifiable business risks. We build a dynamic incomplete markets model of entrepreneurial finance to demonstrate the important implications of nondiversifiable risks for entrepreneurs' interdependent consumption, portfolio allocation, financing, investment,...

The real options framework has been used extensively to analyze the timing of investment under uncertainty. While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are very impatient about choices in the...