Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost effective measure leading to the emergence of both nationwide (SO2 ) and supranational (CO2 ) emission...

We develop a continuous-time real options pricing model to study managers’incentives to cheat in the presence of equity-based compensation policies.We show that managers’ incentives to cheat are strongly influenced by theefficiency of the justice. Our model’s main result is that managers...

In this article the problem of the American option valuation in a L´vy process setting is analyzed. The perpetual case is first considered. Without possible discontinuities (i.e. with negative jumps inthe call case), known results concerning the currency option value as well as the exercise...

In spite of the fact that they can draw on a larger, more liquid and more diversifiedpool of capital than the equity of reinsurance companies, financial markets have failed to displace reinsurance as the primary risk-sharing vehicle for natural catastrophe risk. We show that this failure can be...

Over the period 2002 to 2003, Switzerland and the European Union (EU) were engaged in negotiations regarding banking secrecy. The EU's stated goal was for Switzerland to abolish banking secrecy. Switzerland refused and offered to impose a withholding tax on interest income instead. The two...

In this article, we describe the various sorts of American Parisian options and propose valuation formulae. Although there is no closed-form valuation for these products in the non perpetual case, we have been able to reformulate their price as a function of the exercise frontier. In the...

When information is costly, a seller may wish to prevent prospective buyers from acquiring information, for the cost of information acquisition is ultimately borne by the seller. A seller can achieve the desired prevention of information acquisition through posted-price selling, by offering...

This paper examines the investment strategies of regulated companies in abatement technologies,market participants' trading behaviors, and the liquidity level in an inter-temporalcap{and{trade market using laboratory experiments. The experimental analysis is performedunder varying market...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

We investigate the suitability of securitization as an alternative to reinsurance forthe purpose of transferring natural catastrophe risk. We characterize the conditionsunder which one or the other form of risk transfer dominates using a setting in whichreinsurers and traders in financial...