Progressive income taxation regimes can be modelled as a weighted portfolio of European Call options over an individual's gross taxable income. These options are struck at the tax bracket lower bound and weighted by the increment in the marginal tax rate. The government holds a long position in...

The decision of whether a firm should voluntarily liquidate, rather than continue trading, is a function of many parameters including uncertain future earnings, asset depreciation, and the firm's cost-of-debt. We develop an equity valuation model derived from the fundamental accounting equation...

Haley and Walker (2010) present the Euclidean and Empirical Likelihood nonparametric option pricing models as alternative tilts to Stutzer's (1996) Canonical pricing method. We empirically test the comparative strengths of each of these methods using a large sample of traded options on the...

Corporate debt maturity is a concave function of financial leverage when the debt has restrictive asset-based covenants attached. This concavity kicks in earlier with increasing covenant tightness and is absent when firms have no restrictive asset-based covenants. We argue that this concavity is...