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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-5957.2010.02206.x Byline: Stefan Hirth (1), Marliese Uhrig-Homburg (1) Keywords: investment timing; financing constraints; costly external financing; real options Abstract: Abstract: This paper analyzes the investment timing of firms facing two dimensions of financing constraints: Liquidity constraints and capital market frictions inducing financing costs. We show that liquidity constraints are not sufficient to explain voluntary investment delay. However, when additionally considering financing costs, we can explain both voluntary delay and acceleration of investment. More precisely, we find that investment thresholds are U-shaped in liquid funds. For high-liquidity firms, investment thresholds are decreasing (i.e., accelerated investment takes place) in either dimension of financing constraint. In contrast, investment thresholds are increasing (i.e., investment is further delayed) in either form of financing constraint for low-liquidity firms. For intermediate levels of liquidity, investment thresholds are U-shaped in market frictions. Author Affiliation: (1)The authors are respectively from Aarhus School of Business, Denmark and Karlsruhe Institute of Technology (KIT), Germany. They would like to thank an anonymous referee, Nicole Branger, Athanasios Episcopos, Christian Riis Flor, Alexander Groh, Yalin Gunduz, Karl Ludwig Keiber, Olaf Korn, Joachim Moser, Martin Ruckes, Jan Seifert, and Rosanne Vanpee, as well as conference participants at OR 2004 Tilburg, DGF 2004 Doctoral Student Seminar Tubingen, Campus for Finance 2005 Vallendar, Swiss Society for Financial Market Research 2005 Zurich, FMA European Conference 2005 Siena, DGF 2005 Augsburg, Verein fur Socialpolitik 2005 Bonn, Symposium on Finance, Banking, and Insurance 2005 Karlsruhe, and IFSAM 2006 Berlin, and seminar participants at University of Southern Denmark Odense, for their helpful comments and suggestions. Article History: (Paper received November 2007, revised version accepted February 2010) Article note: (*) Address for correspondence: Stefan Hirth, Aarhus School of Business, Aarhus University, Fuglesangs Alle 4, DK-8210 Aarhus V, Denmark., e-mail: stefanh@asb.dk.

C[O.sub.2] emission allowances are traded with increasing liquidity within the EU emissions trading scheme (ETS). Besides spot contracts, futures and options are also available OTC and on exchanges across Europe. [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeem.2008.03.003 Byline: Jan Seifert, Marliese Uhrig-Homburg, Michael Wagner Keywords: CO.sub.2 emission certificates; Emission trading; Spot price process; Stochastic optimal control Abstract: CO.sub.2 emission allowances are traded nowadays over the counter (OTC) and on exchanges across the European Union (EU). It thus becomes increasingly important for traders of these emission certificates to have a valid CO.sub.2 spot price model to value potential derivatives. In addition, CO.sub.2-emitting companies require an adequate CO.sub.2 spot price model in order to better assess their production costs and support emissions-related investment decisions. However, sufficient price history is still lacking for the European Union emission trading scheme (EU ETS). We therefore present a tractable stochastic equilibrium model reflecting stylized features of the EU ETS and analyze the resulting CO.sub.2 spot price dynamics. Our main findings are that CO.sub.2 prices do not have to follow any seasonal patterns, discounted prices should possess the martingale property, and an adequate CO.sub.2 price process should exhibit a time- and price-dependent volatility structure. A brief empirical examination regarding market efficiency complements our analysis. Author Affiliation: Lehrstuhl fur Financial Engineering und Derivate, Universitat Karlsruhe (TH), Postfach 6980, D-76128 Karlsruhe, Germany Article History: Received 23 February 2007

In this article, we address the implementation of pricing models for derivatives whose prices depend on the covariance between asset returns. We show that lead-lag effects can have a strong [...]

In the literature, there is no consensus on a common approach to measure bond liquidity. This paper is the first to comprehensively compare all commonly employed liquidity measures based on intraday and daily data for the U.S. corporate bond market. We find that high-frequency measures based on intraday data are very strongly correlated, implying that previous results should be robust regarding the chosen measure. Most low-frequency proxies based on daily data generally also measure transaction costs well. However, three proxies clearly take the lead: Corwin and Schultz's (2012) high-low spread estimator, Roll's (1984) measure, and Hasbrouck's (2009) Gibbs measure. [ABSTRACT FROM AUTHOR]

Research based on data from the German market for interest-rate warrants from 1990 to 1993 provides empirical evidence about whether spot- or forward-rate models are more suitable for supporting the measurement, control and supervision of interest-rate risk. It has been shown that the one-factor forward rate model with linear proportional volatility and the two spot-rate models with two factors perform much better than the other four models for this period. In particular, the one-factor forward-rate model with linear proportional volatility and the two-factor spot-rate model with stochastic volatility perform very well.

Valuation heuristics are widely used to value traditional time vesting option plans. This study analyses if these heuristics also qualify for valuing performance vesting plans. We examine performance conditions tied to the underlying stock, the stock's performance relative to a stock index, and an earnings measure. The differences between the approximated option values and the values assuming optimal exercise are overall smaller with the performance conditions than without them. In particular, this result holds when the heuristic exercise assumptions are based on the case without performance conditions, which is a considerable simplification in practice. [ABSTRACT FROM AUTHOR]