are more associated with precautionary motives rather than agency incentives. Finally, although cash-rich firms undertaking ESOs-induced M&As improve their profitability, the market valuations of these firms after conducting ESOs-induced M&As still depends on their corporate governance environment. The third article by Lin, Chuang, and Fang study the valuation and risk management of CME’s rainfall index binary contracts. The authors apply the first-order, two-state Markov chain and with the magnitude model based on mixed exponential distribution, to describe the underlying rainfall index. Because the market is incomplete, this paper prices the rainfall index binary options using the Esscher transform and calibrates the market price of risk with real market data. The empirical results suggest that the investors have more accurate estimations of the rainfall index when approaching the end of the contract period or when entering the accumulation period. Finally, it is shown that the market participants are mainly hedgers, which may explain why the rainfall derivatives market is not sustainable. Hsiou-Wei Lin David Ming-Huang Chiang San-Lin Chung
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