ABSTRACT In this paper, we present a tax‐induced framework to analyze debt maturity problems. We show that under some modifications of the existing U.S. tax code, debt maturity is irrelevant even in the presence of taxes and bankruptcy costs that yield an optimal capital structure. If this restrictive structure is relaxed, and assuming the Miller [15] equilibrium does not prevail, tax reasons would usually imply the existence of an optimal debt maturity structure. If there exists a gain from leverage, then an increasing term structure of interest rates, adjusted for default risk, results in long‐term debt being optimal. A decreasing term structure, under similar circumstances, renders short‐term debt optimal. In the absence of agency costs, a Miller [15]‐type result emerges at equilibrium and irrelevance prevails. We also argue that agency costs could again reverse the irrelevance and imply a firm‐specific optimal debt maturity structure.

The purposes of this paper are twofold. The first is to demonstrate that the expected utility hypothesis is a reasonable description of behavior for consumers who face a low-probability, high-loss natural hazard event, given that they have adequate information. The second is to demonstrate that in California information non earthquake hazards was generated by a 1974 state law that created a market for safe housing that previously did not exist.

Applying Fishburn's [4] conditions for convex stochastic dominance, exact linear programming algorithms are proposed and implemented for assigning discrete return distributions into the first- and second-order stochastic dominance optimal sets. For third-order stochastic dominance, a superconvex stochastic dominance approach is defined which allows classification of choice elements into superdominated, mixed, and superoptimal sets. For a choice set of 896 security returns treated previously in the literature, 454, 25, and 13 distributions are in the first-, second-, and third-order convex stochastic dominance optimal sets, respectively. These optimal sets compare with admissible first-, second-, and third-order stochastic dominance sets of 682, 35, and 19 distributions, respectively. The applicability of superconvex stochastic dominance for continuous distributions defined over a bounded interval is then shown. The difficulties in identifying the elements of the superdominated set for distributions defined over the entire real line are demonstrated in the determination of the dominated choices for a set of normally distributed mutual fund returns previously examined by Meyer [9]. Specifically, we find that the dominated set determined by Meyer is too large.

This paper models an individual's trading decision, given: (1) his/her demand function to hold shares of an asset, (2) his/her expectation on what the market clearing price will be, and (3) the design of the market which determines how orders will be translated into trades. The particular market design we consider is the batched trading (periodic call) regime. Assuming investors are distributed according to their propensities to hold shares, we model the aggregation of orders to obtain market clearing values of price and volume and to show the way in which, with trading friction, these solutions differ from Pareto efficient values. The importance of this analysis for various issues concerning market design is noted.

ABSTRACT Lease cancellation insurance protects the lessor against early termination of a cancellable operating lease. This paper presents a contingent claims model for determining the “fair” premium for this type of insurance policy. Comparative statics are considered, and some numerical examples are presented to illustrate the model. Among other things, the insurance premium is sensitive to the expected rate of economic depreciation of the leased asset and to the leased asset's systematic and nonsystematic risk.

ABSTRACT Applying Fishburn's [4] conditions for convex stochastic dominance, exact linear programming algorithms are proposed and implemented for assigning discrete return distributions into the first‐ and second‐order stochastic dominance optimal sets. For third‐order stochastic dominance, a superconvex stochastic dominance approach is defined which allows classification of choice elements into superdominated, mixed, and superoptimal sets. For a choice set of 896 security returns treated previously in the literature, 454, 25, and 13 distributions are in the first‐, second‐, and third‐order convex stochastic dominance optimal sets, respectively. These optimal sets compare with admissible first‐, second‐, and third‐order stochastic dominance sets of 682, 35, and 19 distributions, respectively. The applicability of superconvex stochastic dominance for continuous distributions defined over a bounded interval is then shown. The difficulties in identifying the elements of the superdominated set for distributions defined over the entire real line are demonstrated in the determination of the dominated choices for a set of normally distributed mutual fund returns previously examined by Meyer [9]. Specifically, we find that the dominated set determined by Meyer is too large.

The article discusses several books about various topics. Some of the books are: "Deterring Fraud: The Internal Auditor's Perspective," by W. Steve Albrecht, Ketth R. Howe and Marshall B. Romney, "Management Control in Nonprofit Organizations," 3rd ed., by Robert N. Anthony and David W. Young, "Business Expansion Scheme," by Brian Armitage, "Bank Accounts: A World Guide to Confidentiality," by Edouard Chambost, translated by Peter Walton and Margaret Thompson, "The Tangled Web of Price Variation Accounting: The Development of Ideas Underlying Professional Prescriptions in Six Countries," by F.L. Clarke, "Fore-Runners of Realizable Values Accounting in Financial Reporting," edited by G.W. Dean and M.C. Wells, "Careers in Accounting," by Gloria L. Gaylord and Glenda E. Ried, "Bridges to Infinity: The Human Side of Mathematics," by Michael Guillen, "Bond Duration and Immunization: Early Developments and Recent Contributions," edited by Gabriel A. Hawawini, "Foundations: The Greenwood Encyclopedia of American Institutions," edited Harold M. Keele and Joseph C. Kiger, "The Impact of Taxes on U.S. Citizens Working Abroad," by Ernest R. Larkins.