Do financial derivatives enhance or impede innovation? We aim to answer this question by examining the relationship between equity options markets and standard measures of firm innovation. Our baseline results show that firms with more options trading activity generate more patents and patent citations per dollar of R&D invested. We then investigate how more active options markets affect firms' innovation strategy. Our results suggest that firms with greater trading activity pursue a more creative, diverse and risky innovation strategy. We discuss potential underlying mechanisms and show that options appear to mitigate managerial career concerns that would induce managers to take actions that boost short-term performance measures. Finally, using several econometric specifications that try to account for the potential endogeneity of options trading, we argue that the positive effect of options trading on firm innovation is causal.

The book examines applications in two disparate fields linked by the importance of valuing information: public health and space. Researchers in the health field have developed some of the most innovative methodologies for valuing information, used to help determine, for example, the value of diagnostics in informing patient treatment decisions. In the field of space, recent applications of value-of-information methods are critical for informing decisions on investment in satellites that collect data about air quality, fresh water supplies, climate and other natural and environmental resources affecting global health and quality of life.

In representative democracies, citizens give politicians the authority to design, implement, and evaluate a wide variety of policies. Delegating tasks to elected officials may create agency problems between citizens and their politicians. Politicians may