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This paper examines the risk incentives of traditional and non-traditional call options in the context of a levered firm where managers under-invest due to risk aversion. Our results contrast with those presented in the literature inasmuch as lookback calls do not always induce higher risk taking than regular calls, and managers always prefer a combination of regular calls and shares of stock in their compensation package as opposed to only company shares. We also show that Asian options outperform both plain-vanilla and other nonstandard options in inducing higher risk taking and, thereby, are a superior remedy for alleviating the agency costs of deviating from the optimal volatility level. Finally, we shed new insights that better clarify the incorrect arguments found in the literature regarding the delta of regular and lookback calls. [ABSTRACT FROM AUTHOR]

Much of the work on the valuation of levered (and unlevered) warrants assumes that the volatility of the underlying state variable is constant. This paper extends the literature on warrant pricing to a more general assumption for the state variable process, the so-called constant elasticity of variance (CEV) process. The CEV model is well-known for its ability to capture some empirical observations found in the financial economics literature, namely the asymmetry between equity returns and volatility and the implied volatility skew. Using the CEV process, we are able to reduce pricing bias as the volatility becomes a function of the underlying state variable. We price European-style call warrants without restrictions on the debt maturity. When warrants have the same maturity as debt, it is possible to obtain closed-form solutions for warrants prices. When the maturity of warrants is different from the maturity of debt, prices can be computed numerically through very efficient and simple to implement valuation methodologies. [ABSTRACT FROM AUTHOR]

This paper develops a method for solving free boundary problems for time-homogeneous diffusions. We combine the complete exponential system of solutions for the heat equation, transmutation operators and recently discovered Neumann series of Bessel functions representation for solutions of Sturm-Liouville equations to construct a complete system of solutions for the considered partial differential equations. The conceptual algorithm for the application of the method is presented. The valuation of Russian options with finite horizon is used as a numerical illustration. The solution under different horizons is computed and compared to the results that appear in the literature. [ABSTRACT FROM AUTHOR]

The discounted price process under the constant elasticity of variance (CEV) model is not a martingale (wrt the risk-neutral measure) for options markets with upward sloping implied volatility smiles. The loss of the martingale property implies the existence of (at least) two option prices for the call option: the price for which the put-call parity holds and the (risk-neutral) price representing the lowest cost of replicating the call payoff. This article derives closed-form solutions for the Greeks of the risk-neutral call option pricing solution that are valid for any CEV process exhibiting forward skew volatility smile patterns. Using an extensive numerical analysis, we conclude that the differences between the call prices and Greeks of both solutions are substantial, which might yield significant errors of analysis for pricing and hedging purposes. [ABSTRACT FROM AUTHOR]

This paper proves the existence, uniqueness, monotonicity and continuity of the early exercise boundary attached to American-style standard options under the jump to default extended constant elasticity of variance model of Carr and Linetsky (Financ Stoch 10(3):303–330, 2006). [ABSTRACT FROM AUTHOR]

This article derives a new integral representation of the early exercise boundary for valuing American-style options under the constant elasticity of variance (CEV) model. An important feature of this novel early exercise boundary characterization is that it does not involve the usual (time) recursive procedure that is commonly employed in the so-called integral representation approach well known in the literature. Our non-time recursive pricing method is shown to be analytically tractable under the local volatility CEV process and the numerical experiments demonstrate its robustness and accuracy. [ABSTRACT FROM AUTHOR]

This is the fourth and final study designed to develop International Classification of Functioning, Disability and Health (ICF, and children and youth version, ICF-CY) core sets for attention-deficit hyperactivity disorder (ADHD). To investigate aspects of functioning and environment of individuals with ADHD as documented by the ICF-CY in clinical practice settings. An international cross-sectional multi-centre study was applied, involving nine units from eight countries: Denmark, Germany, India, Italy, Portugal, Saudi Arabia, Sweden and Taiwan. Clinicians and clinical researchers rated the functioning level of 112 children, adolescents and adults with ADHD using the extended ICF-CY checklist version 2.1a. The ratings were based on a variety of information sources, such as medical records, medical history, clinical observations, clinical questionnaires, psychometric tests and structured interviews with participants and family members. In total, 113 ICF-CY categories were identified, of which 50 were related to the activities and participation, 33 to environmental factors and 30 to body functions. The clinical study also yielded strengths related to ADHD, which included temperament and personality functions and recreation and leisure. The study findings endorse the complex nature of ADHD, as evidenced by the many functional and contextual domains impacted in ADHD. ICF-CY based tools can serve as foundation for capturing various functional profiles and environmental facilitators and barriers. The international nature of the ICF-CY makes it possible to develop user-friendly tools that can be applied globally and in multiple settings, ranging from clinical services and policy-making to education and research. [ABSTRACT FROM AUTHOR]

This is the fourth international preparatory study designed to develop International Classification of Functioning, Disability and Health (ICF, and Children and Youth version, ICF-CY) Core Sets for Autism Spectrum Disorder (ASD). Examine functioning of individuals diagnosed with ASD as documented by the ICF-CY in a variety of clinical settings. A cross-sectional study was conducted, involving 11 units from 10 countries. Clinical investigators assessed functioning of 122 individuals with ASD using the ICF-CY checklist. In total, 139 ICF-CY categories were identified: 64 activities and participation, 40 body functions and 35 environmental factors. The study results reinforce the heterogeneity of ASD, as evidenced by the many functional and contextual domains impacting on ASD from a clinical perspective. [ABSTRACT FROM AUTHOR]