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Why are those options smiling?
This paper tests whether the true smile in implied volatilities is flat. The smile in observed Black-Scholes implied volatilities has often been attributed to deficiencies in the B-S model, such as the assumption of constant ...
The corporate cost of capital and financial investment in New Zealand
We have estimated the cost of capital for the New Zealand listed non-finance corporate sector by the corporate internal rate of return method adopted by Fama and French (1999). The real IRR on value is 1.87% and IRR on ...
The announcement impact of seasoned equity offerings on bondholder wealth
Previous studies document a negative and significant return to equity on the announcement of a seasoned equity offering. However, the effects of such an announcement on the firms other securities has received little ...
Ship investment under uncertainty: A real option approach
Discounted cash flow (DCF) methodology has long been advocated as the appropriate theoretical underpinning for maritime investments (Bendall, 1979; Evans, 1984; Gardner, Goss and Marlow, 1984). However, its limitations are ...
US stock prices and macroeconomic fundamentals
Using 54 years of US quarterly data and a VAR model underpinned by a theory of the relationship between stock prices and output, this paper considers the deviations of
US stock prices from their fundamental value. To do ...
Motivations for derivatives usage among New Zealand firms
Theoretical research argues that using derivative instruments for risk management can add value to a firm if there are capital market imperfections such as costs associated with financial distress, progressivity in tax ...
Explaining corporate governance: Boards, bylaws, and charter provisions
We provide arguments and present evidence that corporate governance structures are endogenous responses to the costs and benefits firms face when they choose the mechanisms that comprise those structures. In particular, ...
FDIC losses in bank failures: Has FDICIA made a difference?
Banks are generally failed and placed in receivership when the value of their assets declines below the value of their deposits and other debt, so that the value of their capital (net worth) becomes negative. As a result, ...
Financial conditions indexes
This paper provides an exposition of the nature, means of estimation and uses of Financial Conditions Indexes (FCIs) and their relationship to the more common Monetary Conditions Indexes (MCIs) that are used by market ...
House Prices, fundamentals and Inflation
This paper studies actual house prices relative to fundamental house prices. Using UK data and a time-varying present value approach, we find that deviations of house prices from their fundamental value (as warranted by ...