Working Paper
Option prices with uncertain fundamentals theory and evidence on the dynamics of implied volatilities
David, Alexander; Veronesi, Pietro (1999)
In an incomplete information model, investors' uncertainty about the underlying drift rate of a firm's fundamentals affects option prices through (i) endogenous and belief-dependent stochastic volatility, (ii) stochastic covariance between returns and volatility, and (iii) a market price of "belief risk." For the special case where the drift takes only two values, we provide an option pricing formula using Fourier Transforms. The model calibrated to 1960-1998 S&P 500 real earnings growth shows that investors' uncertainty explains intertemporal variation in the slope and curvature of implied ...
Finance and Economics Discussion Series , Paper 1999-47

Working Paper
Information acquisition in financial markets: a correction
Barlevy, Gadi; Veronesi, Pietro (2007)
This note provides a proper example for the mechanism of strategic complementarities proposed in our paper. ; Original paper in Review of Economic Studies, January 2000, v. 67, no.1, p. 79?90.
Working Paper Series , Paper WP-07-06