This paper explores a new approach for pricing derivatives that aims at distinguishing exposure to implied volatility and exposure to future realized volatility, thus impacting hedging strategies with options. By construction, this approach diverts from standard pricing by pure arbitrage that...

We investigate how firms manage financial default risk (on debt) and operational default risk (on delivery obligations). Financially constrained firms reduce operational hedging through inventory and supply chain in favor of cash holdings. Our model predicts that firms' markup increases with...