Journal Article A Closed-Form GARCH Option Valuation Model Get access Steven L. Heston, Steven L. Heston Goldman Sachs & Company Search for other works by this author on: Oxford Academic Google Scholar Saikat Nandi Saikat Nandi Research Department, Federal Reserve Bank of Atlanta Address all correspondence to Saikat Nandi, Research Department, Federal Reserve Bank of Atlanta, 104 Marietta Street, N.W, Atlanta, GA 30303, or e-mail: [email protected]. Search for other works by this author on: Oxford Academic Google Scholar The Review of Financial Studies, Volume 13, Issue 3, July 2000, Pages 585–625, https://doi.org/10.1093/rfs/13.3.585 Published: 15 June 2015

We examine the interaction between internal control assessments and substantive testing in a model of fraud detection. The purpose of our study is to examine a two‐stage model of the auditor‐manager interaction in which the auditor assesses the “likelihood” or possibility of fraud in the first stage and conducts substantive tests in the second stage. We examine the allocation of audit resources across these two distinct facets of the audit. We find that, regardless of the auditor's allocation, the probability of undetected fraud remains the same, but the allocation of some audit resources to internal control assessment may provide cost savings for the auditor.

We examine valuation effects of announcements of seasoned equity issuance and assess the impact of the choice of flotation method in the U.K. Rights offerings are predominant, but in 1986, British firms gained the flexibility to conduct placings, which are comparable to U.S. firm commitment offerings. A placing is a fixed-price bought deal that increases ownership dispersion. Placings generate significantly positive share price effects, whereas rights offerings have large negative valuation effects that become more adverse after 1985. We conclude that the option to conduct placings enhances the ability of firms to signal their quality and to use a seasoned equity offering to reduce ownership concentration.

Jarl G. Kallberg, Crocker L. Liu, Charles Trzcinka, The Value Added from Investment Managers: An Examination of Funds of REITs, The Journal of Financial and Quantitative Analysis, Vol. 35, No. 3 (Sep., 2000), pp. 387-408

We study elections in which one party (the strong party) controls a source of political unrest; e.g., this party could instigate riots if it lost the election. We show that the strong party is more likely to win the election when there is less information about its ability to cause unrest. This is because when the weak party is better informed, it can more reliably prevent political unrest by implementing a “centrist” policy. When there is uncertainty over the credibility of the threat, “posturing” by the strong party leads to platform divergence.

We characterize the values of government debt and the debt's maturity structure under which financial crises brought on by a loss of confidence in the government can arise within a dynamic, stochastic general equilibrium model. We also characterize the optimal policy response of the government to the threat of such a crisis. We show that when the country's fundamentals place it inside the crisis zone, the government may be motivated to reduce its debt and exit the crisis zone because this leads to an economic boom and a reduction in the interest rate on the government's debt. We show that this reduction can be gradual if debt is high or the probability of a crisis is low. We also show that, while lengthening the maturity of the debt can shrink the crisis zone, credibility-inducing policies can have perverse effects.