This paper examines the two-way relationship between managerial compensation and corporate risk by exploiting an unanticipated change in firms' business risks. The natural experiment provides an opportunity to examine two classic questions related to incentives and risk—how boards adjust...

One consequence of the shift to fair value measurement is the emergence of voluntary disclosures in audited financial statements that question the reliability of mandated fair value information. We refer to these disclosures as reliability disavowals. We examine stock option volatility estimates...

The volatility information content of stock options for individual firms is measured using option prices for 149 U.S. firms and the S&P 100 index. ARCH and regression models are used to compare volatility forecasts defined by historical stock returns, at-the-money implied volatilities and...

We investigate the association of various firm-specific and market-wide factors with the riskneutral skewness (RNS) implied by the prices of individual stock options. Our analysis covers 149 U.S. firms over a four-year period. Our choice of firms is based on adequate liquidity and trading...