The dynamic replication strategy of Black and Scholes is important enough that it is worth repeating from last week. Recall the setup. From day k − 1 to day k, the stock (risky asset price) either goes up Sk−1 → Sk = uSk or goes down Sk = dSk−1 (recall that we actually did not necessarily need u > 1 or d < 1, but it is convenient to think of u as up and d as down.) The replicating portfolio is ...

One of the most popular procedures used in selection processes is the employment/selection interview (Dipboye, 1992). A selection interview is defined by Dipboye as “a dialogue initiated by one or more persons to gather information and evaluate the qualifications of an applicant for employment.” Some researchers choose the term “recruitment interview” to imply that the interview is a “two-way p...

The purpose of this paper is to investigate the causes and consequence of cash flow sensitivity. While cash flow has been regarded as an agency problem, empirical investigations in context of managerial conservatism or optimizing behavior are limited. In this paper we investigate two key aspects of cash flow sensitivity: whether cash flow sensitivity causes variations in fixed asset investments...

In this paper, a dynamic terms of sale model is developed which suggests deep cash discounts can be partially explained by the positive relationship between the shadow value of sales and the optimal cash discount. The effect of sales volume uncertainty on the magnitude of cash discounts is also explored. Numerical results suggest the relationship between uncertainty and cash discounts is nonlin...

This study models the supply chain related cash flow risks for a business entity measured by the standard deviations of cash inflows, outflows, and netflows of each period in a planning horizon. The goal is to provide an insightful look on how common practices that intend to improve the Cash Conversion Cycle (CCC), e.g., offering early payment discounts, may contribute to cash flow risks. We sh...

business is business! And business must grow –Dr. Seuss, The Lorax The paper investigates the agency argument that sales growth in firms with free cash flow (and without strong governance) is less profitable than sales growth for firms without free cash flow. It also tests whether strong governance conditions improve the performance of firms with free cash flow and/or limit the investments in u...

We provide one of the first large sample comparisons of cash policies in public and private U.S. firms. We first show that despite higher financing frictions, private firms hold, on average, about half as much cash as public firms do. By examining the drivers of cash policies for each group, we are able to attribute the difference to the much higher agency costs in public firms. By combining ev...

Recently, some divisible electronic cash (e-cash) systems have been proposed. However, in existing divisible e-cash systems, efficiency or unlinkability is not sufficiently accomplished. In the existing efficient divisible cash systems, all protocols are conducted in the order of the polynomial of logN where N is the divisibility precision (i.e., (the total coin amount)/ (minimum divisible unit...

Untraceability and unreuseability are essential security properties for electronic cash protocols. Many protocols have been proposed to meet these two properties. However, most of them have not been formally proved to be untraceable and unreuseable. In this paper we propose to use the applied pi calculus as a framework for describing and analyzing electronic cash protocols, and we analyze Fergu...

I quantify a new motive of holding cash through the channel of financing risk. I show that if the access to future credit is risky, firms may issue long-term debt now and save funds in cash to secure the current credit capacity for the future. I structurally estimate the model and find that this motive explains about 30% of cash holdings in the data. Counterfactual experiments indicate that the...