This paper examines how alternative coupon recovery assumptions—no-coupon recovery (NCR) versus full-coupon recovery (FCR)—affect default probability estimates and their empirical performance in the Korean corporate bond market. Specifically, we compare the NCR model of Hilscher, Jarrow, and van Deventer (2025) (HJD) with the FCR model of Jarrow and Turnbull (1995) (JT) to assess how differences in coupon recovery assumptions translate into variation in discriminatory power for actual credit events. Using daily corporate bond data for publicly listed firms from the FnPricing database over the period 2015–2024, we analyze the behavior of model-implied default probabilities around credit events. The results show that default probabilities derived from the HJD model—which excludes recovery on post-default coupons—respond more sensitively to market-implied measures of credit risk than those from the JT model. Overall, the findings provide evidence that coupon recovery assumptions play a critical role in determining the ability of default probability measures to identify realized credit events.

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This study examines whether capital tax incentives entail unintended costs for information quality. Exploiting the staggered expansions of China’s accelerated depreciation policy for fixed assets in 2014, 2015, and 2019 as a quasi-natural experiment, we use A-share listed firms from 2011 to 2024 and apply a staggered difference-in-differences design with event-study tests for parallel trends. The results show that the policy significantly increases accrual-based earnings management. Further evidence indicates that the policy raises earnings management by releasing tax-shield cash flows and easing financing constraints, while external monitoring does not strengthen commensurately. In China’s institutional setting of tax-book separation, treated firms exhibitabnormal declines in book depreciation rates, consistent with reporting-oriented earnings management through adjustments to depreciation estimates. Firms also strategically reallocate manipulation tools. Because asset-heavy firms have greater discretion over depreciation estimates, their accrual-manipulation response is weaker; by contrast, asset-light firms face more limited depreciation discretion and exhibit stronger accrual manipulation. Heterogeneity analyses show that these effects are more pronounced among private firms, firms in eastern regions, and younger firms. Overall, the findings reveal that accelerated depreciation can reshape firms’reporting incentives and manipulation strategies while improving cash flows, suggesting that regulators and external auditors should pay closer attention to changes in depreciation estimates and related disclosures.

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This study examines how yield provision in stablecoins affects payment system stability and proposes regulatory design principles appropriate for the Korean market. The analysis is motivated by the growing use of rewards, interest-like payments, and decentralized finance services linked to stablecoin holdings. Although these arrangements may increase user benefits, they can alter the economic character of stablecoins by combining payment functionality with investment incentives. Because the associated risks depend on who provides the return, how it is generated, and what rights users obtain, this study distinguishes three forms of stablecoin yield provision: issuer-based yield, platform-based yield, and DeFi-based yield. The study adopts a theoretical and institutional policy-analysis approach based on prior research, regulatory materials, market practices, and a comparative review of the United States, the European Union, and Korea. Issuer-based yield refers to interest or an equivalent return paid directly by a stablecoin issuer and is generally linked to reserve-asset income. Platform-based yield is provided by exchanges, wallet providers, fintech companies, and other intermediaries that use deposited stablecoins for lending, liquidity provision, margin financing, or asset management. DeFi-based yield arises through smart contracts and on-chain protocols, often after users deposit stablecoins and receive tokens representing a yield-bearing position. Although platform-based and DeFi-based yields differ in their operational structures, both embed a payment asset in financial intermediation or investment activity. The analysis identifies five channels through which yield provision may affect payment system stability. First, it can increase run risk by shifting the motivation for holding stablecoins from transactional convenience toward return seeking. Yield-sensitive holders may respond rapidly to changes in interest rates, perceived risk, platform credibility, or expected returns. Under stress, this sensitivity may lead to coordinated withdrawals and redemptions, increasing liquidity pressure, reserve-asset sales, and depegging risk. Second, yield competition may strengthen risk-taking incentives. Issuers seeking to fund higher returns may increase the maturity or risk of reserve assets, while platforms may rely on leverage, maturity transformation, or risky lending. Third, losses and redemption pressure can be transmitted beyond individual issuers or platforms. Large-scale reserve liquidation may affect short-term funding markets, while collateral links, rehypothecation, margin calls, and forced liquidations may amplify shocks and transmit them to traditional financial markets. Fourth, yield provision may weaken the payment function of stablecoins. As balances become more responsive to returns and risk perceptions, payment-related liquidity may become less stable, and the distinction between a payment instrument and an investment product may become unclear. Fifth, yield-bearing stablecoins may interact with bank deposits, central bank digital currencies, financial intermediation, and monetary policy transmission by encouraging funds to migrate toward nonbank or offshore arrangements. The comparative analysis shows that major jurisdictions increasingly recognize these concerns, although their approaches differ. The European Union prohibits interest on asset-referenced tokens and e-money tokens under the Markets in Crypto-Assets Regulation and broadly covers benefits linked to token holdings. The United States prohibits payment stablecoin issuers from directly providing interest or yield under the GENIUS Act, while rewards offered by affiliates, exchanges, or other third parties remain a regulatory issue. Korea has not yet established a comprehensive framework for stablecoin yield provision. Existing rules focus mainly on virtual-asset user protection and unfair trading, while overseas stablecoins, exchange rewards, platform programs, and DeFi services remain accessible to Korean users. This regulatory gap requires a framework that addresses issuer conduct, functionally equivalent rewards, financial-intermediation activities, offshore providers, and personal-wallet transfers. Based on this analysis, the study proposes a function-based and risk-sensitive framework for Korea. Issuer-based yield on payment stablecoins should, in principle, be prohibited because it may undermine reserve safety, encourage yield-seeking asset management, and make payment stablecoins resemble unprotected deposits. Platform-based yield should not be governed by a uniform prohibition or permission. Regulation should distinguish rewards linked to actual payment or service use from returns paid merely for holding or depositing stablecoins. Where a platform conducts lending, maturity transformation, asset management, or other financial intermediation, enhanced requirements should apply, including authorization or registration, segregation of customer assets, liquidity and risk-management standards, disclosure of the source of returns, and controls on conflicts of interest. DeFi-based yield should be structurally separated from payment stablecoins and regulated as an investment product or high-risk financial service when it involves smart-contract risk, oracle risk, leverage, rehypothecation, or liquidity shortfalls. The study further emphasizes standardized risk disclosure, clear redemption terms, restrictions on misleading descriptions, and integrated supervision covering issuers, platforms, custodians, exchanges, and offshore access channels. These measures should be coordinated with Korea’s electronic finance, banking, capital market, virtual-asset, CBDC, and monetary policy frameworks. The main contribution of this study is to treat stablecoin yield provision not as a peripheral product feature but as an institutional issue affecting payment infrastructure and financial stability. Because the analysis is primarily theoretical and institutional, future research should empirically examine liquidity volatility, redemption behavior, depegging risk, and the market-wide effects of platform-based and DeFi-based yield structures.

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This study examines the relationship between the regret premium, investor composition, and investor-specific trading responses in the Korean stock market. Behavioral finance suggests that asset prices may reflect psychological biases. Regret is relevant because investors may compare the performance of the assets they hold with that of alternatives they could have selected. Recent studies define regret (REG) as the difference between the highest return within an industry and the realized return of an individual stock and show that stocks with higher REG subsequently earn higher returns. Although prior research has established this premium, relatively little is known about the investor base in which it is more pronounced or how different investor groups subsequently trade high-REG stocks. The Korean market provides a useful setting because individual investors account for a substantial share of trading, and transaction data permit separate analyses by investor type. If regret-related price effects are associated with behavioral biases, their strength may vary with investor composition. Individual investors may exhibit limited information-processing capacity, attention-based trading, and contrarian behavior, whereas institutional and foreign investors may engage relatively more in information-based trading or arbitrage. This study first confirms the baseline relationship between REG and future returns. It then examines whether the magnitude of the REG premium differs according to investor trading shares. The analysis employs portfolio sorts and Fama–MacBeth cross-sectional regressions that include interactions between REG and the trading shares of individual, institutional, and foreign investors. It also examines subsequent investor-specific responses using net buying ratios and trading shares, investigates the persistence of the REG premium, and compares its strength between the KOSPI and KOSDAQ markets. The empirical results are as follows. First, REG positively and significantly predicts future stock returns. Portfolios with high REG earn higher subsequent returns than those with low REG, and the return spread remains significant after risk adjustment using the CAPM and the Fama–French three-factor model. Fama–MacBeth regressions likewise confirm that REG has positive predictive power for future returns. Second, the magnitude of the REG premium varies systematically with investor trading shares. The premium is larger among stocks with high individual-investor trading shares, whereas it is weaker among stocks with high institutional- or foreign-investor trading shares. Interaction regressions provide consistent evidence: the interaction between REG and the individual-investor trading share is significantly positive, whereas the interaction between REG and the institutional-investor trading share is significantly negative. The interaction between REG and the foreign-investor trading share is also negative, although its significance weakens after control variables are included. Third, subsequent net buying responses differ across investor types. In regressions using investor-specific net buying ratios as dependent variables, individual investors tend to be net buyers of high-REG stocks, whereas institutional investors exhibit significant net selling. Foreign investors exhibit a negative net buying response in univariate analysis, but the result is not robust after controlling for other stock characteristics. The trading-share analysis reveals a related pattern: REG is positively associated with the subsequent trading share of individual investors and negatively associated with the corresponding shares of institutional and foreign investors. Taken together, high-REG stocks are followed by net buying and higher relative trading participation by individual investors, whereas institutional investors exhibit net selling and lower relative participation. Fourth, the REG premium is not limited to the immediately subsequent month. Although it gradually weakens, it remains evident for several subsequent months. Among stocks with low individual-investor trading shares, the premium weakens relatively quickly, whereas among stocks with high individual-investor trading shares, it tends to persist longer. Investor composition is therefore associated with both the magnitude and persistence of the premium. Fifth, the KOSPI–KOSDAQ comparison provides supplementary evidence consistent with the main results. Individual investors account for a significantly higher share of trading in the KOSDAQ market, whereas institutional and foreign investors account for lower shares. The REG premium is significant in both markets but is larger in the KOSDAQ market. Within each market, the predictive power of REG also tends to be more pronounced among stocks with higher individual-investor trading shares. Overall, this study shows that the REG premium is closely associated with investor composition and heterogeneous subsequent trading responses rather than merely representing an average return anomaly. The larger and more persistent premium among stocks with high individual-investor trading shares, together with the subsequent net buying and higher relative participation of individual investors in high-REG stocks, indicates that investor-specific trading behavior should be considered when interpreting regret-related return patterns. The findings do not establish that investor-specific trading behavior causally generates the REG premium. Rather, they document systematic relationships among the premium, the investor base in which it is more pronounced, and subsequent trading responses. This study extends the economic interpretation of regret effects by identifying investor composition as an important conditioning factor associated with their strength and persistence.

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This study examines how capital intensity and growth opportunities influence the relationship between dividend payouts and firm value. Although previous research has extensively explored dividend policy and firm value, little attention has been given to how firm-specific traits, particularly capital intensity, affect the value implications of dividend payouts. Using signaling theory and agency theory, this study proposes that dividends may serve as stronger signals of financial stability and managerial discipline in firms with higher capital intensity and more growth opportunities. By analyzing a sample of 7,822 firm–year observations of Korean listed firms from 2014 to 2023, we empirically test whether capital intensity moderates the link between dividend payout ratios and firm value. Firm value is assessed using Tobin’s Q and the price-to-book ratio. The findings indicate that dividend payouts are positively related to firm value, and this relationship intensifies for firms with higher capital intensity and greater growth prospects. These results suggest that tangible assets in capital-intensive firms enhance dividend signals’credibility and lower financing frictions, thus boosting investor confidence. This research adds to the literature by emphasizing the moderating role of capital intensity in the dividend–firm value relationship and providing new evidence from Korean listed firms.

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This study empirically investigates the long-term impact of listing regulation relaxation on corporate risk, focusing on South Korea’s unique "Technology-Based Special Listing" system. In line with the global trend of lowering entry barriers for innovative startups, such as the U.S. JOBS Act, South Korea introduced this scheme to enable technologically advanced firms to be listed on the KOSDAQ market. This system is particularly vital for R&D-intensive sectors such as biotechnology, artificial intelligence, and semiconductors, providing them with access to essential funding even before meeting traditional financial milestones, including profitability or specific revenue targets. While this policy fosters innovation, it also introduces significant investment risks driven by financial instability and heightened information asymmetry. Using stock return volatility as the primary proxy for investment risk, this research compares technology special listing firms with general IPO firms listed on the KOSDAQ market from 2014 to 2022. The research dataset was constructed by integrating listing data from the Korea Exchange’s (KRX) KIND system with financial and stock price information from the TS2000 database provided by the Korea Listed Companies Association. The final sample consists of 527 firms, including 149 technology special listing firms. To analyze firm-level risk, the study employs a multi-regression framework, controlling for firm characteristics such as firm size, leverage, return on assets (ROA), cash flow, and market-to-book ratios. The empirical results reveal that technology special listing firms exhibit significantly higher stock return volatility during their first year of listing compared to general IPO firms. This elevated initial risk is primarily attributed to two structural factors: the absence of conventional financial requirements leading to lower financial stability, and substantial information asymmetry inherent in firms whose value is primarily driven by intangible assets like technological potential. For these firms, the lack of a proven financial track record and a reliance on future growth expectations make their stock prices more sensitive to external shocks and market sentiment. However, a key finding of this research is that this volatility gap narrows considerably over the subsequent two to three years. As firm-specific information regarding technological progress and business milestones is disseminated into the market in a timely manner, the initial uncertainty is mitigated, leading to a stabilization of stock prices. Interestingly, while information asymmetry—measured through proxies like trading volume—significantly reduced over time, the study did not find a statistically significant improvement in the fundamental financial soundness of these firms during the same period. This suggests that the long-term reduction in stock return volatility is driven more by the resolution of information uncertainty through market learning than by fundamental financial recovery. To ensure the robustness of the findings, the study implemented several advanced econometric tests. First, the baseline risk measure was supplemented by employing market-adjusted return volatility and idiosyncratic risk. Second, the analysis was restricted to specific industries, such as medical and R&D sectors, where special listings are most prevalent, to control for industry-specific effects. Finally, to mitigate potential selection bias and omitted variable concerns, the research utilized Propensity Score Matching (PSM) and industry-specific 1:1 matching to compare special listing firms with general IPO firms of similar characteristics. The results remained consistent across all robustness checks. The findings of this research offer several contributions to both academia and practice. First, it adds to the global literature on the effects of listing regulation relaxation by providing detailed empirical evidence from the Korean market, highlighting the dual nature of capital access and investor protection. Second, unlike previous studies that focused primarily on the short-term performance or qualitative characteristics of special listing firms, this study provides a comprehensive long-term analysis of investment risk dynamics. It highlights the role of timely and transparent disclosure in reducing market uncertainty over time. For policymakers and regulators, these results suggest that while relaxing financial entry barriers is an effective tool for promoting industrial innovation, such measures must be complemented by robust disclosure requirements and institutional monitoring to protect investors and maintain market trust. For investors, the research provides a balanced perspective, emphasizing that the high initial volatility of technical listing firms is a characteristic of their unique information environment rather than a permanent state of instability. Ultimately, the study confirms that as the market processes and incorporates firm-specific information, the risks associated with innovative but financially unproven firms tend to stabilize.

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Against the backdrop of growing institutional interest in digital assets, this study examines the implications of incorporating Bitcoin into a diversified multi-asset portfolio within a dynamic asset allocation framework that extends beyond static optimization. Rather than treating asset classes as constant components, the study explores how the integration of cryptocurrency interacts with traditional instruments such as equities, fixed-income securities, and commodities under time-varying market conditions using monthly excess return data spanning from January 2014 to October 2025. The study evaluates whether the return-risk profile of Bitcoin can improve portfolio efficiency and robustness under institutional investment constraints and whether dynamic asset allocation strategies offer advantages over their static counterparts in a Korean institutional investment context. To achieve a more stable and practical allocation, this research utilizes the Black–Litterman model as the primary optimization tool, specifically designed to address the limitations of traditional mean–variance optimization, such as the "corner solution" problem and the extreme sensitivity of portfolio weights to minor changes in input data. By incorporating market equilibrium and specific investor views into the optimization process, the Black–Litterman model produces portfolio allocations that are more stable and economically interpretable. This approach is particularly relevant when dealing with Bitcoin, as its high volatility could otherwise lead to impractical and overly concentrated positions. The model is implemented under realistic investment constraints, including the prohibition of short-selling and borrowing, to reflect the practical conditions faced by domestic institutional fund managers. The framework mitigates estimation error by reducing extreme portfolio weights, thereby improving the robustness of the resulting allocations and providing a more stable basis for investment decisions. This feature is particularly important in the context of digital assets, as the high volatility and non-normal return characteristics of Bitcoin may otherwise lead to unstable portfolio allocations and excessive concentration in optimization-based strategies. At the same time, this study incorporates the time-varying nature of financial markets by employing a Markov Regime-Switching Model (MSM). Unlike static models that assume constant return distributions, the MSM allows expected returns, volatilities, and correlations to vary across different market regimes, thereby capturing time-varying market conditions more effectively. The model identifies market regimes based on three distinct criteria: macroeconomic business cycles derived from the Composite Leading Index (CLI) published by Statistics Korea, equity market volatility measured by the V-KOSPI200, and the internal return dynamics of Bitcoin itself, capturing both macroeconomic and cryptocurrency-specific cycles. This framework enables regime-dependent portfolio adjustments as market conditions evolve over time. Such an approach is particularly relevant in financial markets characterized by structural breaks, asymmetric volatility, and rapidly changing cross-asset correlations, where static allocation strategies may fail to respond effectively to shifts in market conditions. The empirical findings suggest that the proposed framework enhances risk-adjusted portfolio performance. Even with relatively small allocations to Bitcoin, portfolios incorporating the digital asset exhibit higher Sharpe, Sortino, and Omega ratios compared to those composed solely of traditional assets, indicating enhanced portfolio efficiency across multiple performance dimensions. The improvement is most pronounced in downside-risksensitive measures such as the Sortino and Omega ratios, suggesting that Bitcoin inclusion improves downside-risk-adjusted performance. This enhanced efficiency stems not only from Bitcoin's high return potential but also from its diversification benefits, as evidenced by improvements in the Diversification Ratio (DR). Bitcoin maintains relatively low correlations with traditional asset classes, particularly sovereign bonds and commodities, highlighting the importance of accounting for cross-asset interactions when evaluating portfolio performance. While Bitcoin inclusion tends to increase tail-risk measures such as Maximum Drawdown (MDD) and Conditional Value-at-Risk (CVaR) under static allocation, the dynamic MSM framework helps mitigate these risks by tactically reducing Bitcoin exposure during high-volatility or bear-market regimes, including major Crypto Winter episodes, while maintaining exposure during recovery periods. The benefit of Bitcoin inclusion is not uniform across all regimes: during high-volatility or bear-market phases, dynamic strategies help preserve capital by reducing exposure, whereas maintaining Bitcoin exposure during low-volatility or recovery phases contributes to improved risk-adjusted returns. These regime-contingent results underscore the importance of treating Bitcoin not as a static allocation but as a dynamically managed component whose optimal weight varies with market conditions. Notably, even conservative investors with a high level of risk aversion (λ=10) can benefit from allocating as little as 1–2% of their portfolio to Bitcoin, as such a modest inclusion is sufficient to improve risk-adjusted performance. This finding has direct practical implications for institutional fund managers who face strict investment constraints yet seek incremental portfolio efficiency gains. Robustness checks using alternative estimation windows, rebalancing frequencies, and risk-aversion levels produce qualitatively similar results, suggesting that the findings are not overly sensitive to model specifications. During periods of significant market downturn, including major Crypto Winter episodes, dynamic strategies demonstrate lower cumulative losses compared to static allocation approaches. Overall, the results suggest that the observed performance improvement is driven not solely by higher returns but also by a dynamic risk adjustment process that responds to regime shifts. The role of Bitcoin in a portfolio is therefore not constant but varies with market conditions, and its contribution is closely linked to regime-dependent interactions with other asset classes. From a policy perspective, the results highlight the importance of establishing a clearer regulatory and institutional framework for digital asset investment in Korea, including standardized legal definitions, accounting treatment, and capital market guidelines, to support the responsible integration of Bitcoin into institutional portfolios. However, these findings should be interpreted within the context of the sample period and model specifications employed in this study, and caution is warranted when extrapolating the results to different market environments. Taken together, this study provides an empirically grounded framework for understanding the role of digital assets in dynamic portfolio management.

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This study examines ex-post responses in pension fund asset management when pre-determined asset allocation constraints are breached due to abrupt market fluctuations or unexpected expenditure shocks. In practice, Korean pension funds typically rely on static strategic asset allocation frameworks that specify target weights and allowable ranges for each asset class. While such frameworks play a central role in risk management and long-term portfolio governance, they are inherently static and provide limited guidance on how investment committees should respond once allocation constraints are violated. This limitation becomes particularly critical in the presence of alternative assets, which are characterized by substantial illiquidity and high transaction costs when liquidated prematurely. Hence, this study develops a formal decision-making model that explicitly incorporates the illiquidity of alternative assets and evaluates the economic implications of different ex-post responses from the perspective of the funding ratio. We consider a pension fund portfolio consisting of two asset classes: liquid traditional assets and illiquid alternative assets. In the presence of an exogenous expenditure shock that necessitates asset sales, the fund faces a discrete ex-post decision between two response strategies. The first strategy is immediate liquidation, in which both liquid and alternative assets are sold in proportions that strictly adhere to the original target allocation weights. This response maintains consistency with the pre-defined strategic asset allocation and the associated risk-return profile, but it entails potentially large and deterministic transaction costs due to the forced liquidation of illiquid assets. The second strategy is a temporary suspension of allocation constraints, under which the fund meets its liquidity needs solely by selling liquid assets while postponing the liquidation of alternative assets. This approach avoids immediate transaction costs but allows for deviation from target weights, potentially worsening the risk-return trade-off relative to the efficient frontier implied by mean-variance optimization. The model evaluates these two ex-post responses by comparing the expected utility of the funding ratio at the end of the period. Preferences are represented by a constant relative risk aversion (CRRA) utility function defined over the funding ratio, reflecting the objective of pension fund investment committees to balance return generation against the risk of underfunding. Within this framework, we examine how the optimal ex-post response depends on three key determinants: the transaction costs associated with alternative assets, the magnitude of the expenditure shock, and the pension fund’s constant relative risk aversion coefficient. Our analysis yields several notable findings. The relative risk aversion coefficient emerges as the dominant factor in determining the optimal ex-post response. While higher transaction costs generally increase the attractiveness of suspending allocation constraints by making immediate liquidation more expensive, their effect is often dominated by the fund's degree of risk aversion. Pension funds with higher levels of risk aversion exhibit a strong preference for immediate liquidation, even when transaction costs are substantial. This preference arises because highly risk-averse decision makers penalize the increased uncertainty and tail risk associated with deviations from the target allocation more heavily than the certainty of transaction costs incurred through liquidation. In contrast, the magnitude of the expenditure shock itself plays a relatively minor role in the decision, once the effects of risk aversion and transaction costs are taken into account. Furthermore, the study highlights the critical role of the gap between the initial allocation to alternative assets and the optimal allocation implied by mean-variance optimization. When the initial weight of alternative assets exceeds the mean-variance optimal level, suspending allocation constraints exacerbates the deviation from the efficient portfolio and further deteriorates the risk-return trade-off. In such cases, immediate liquidation is more likely to be optimal, particularly for risk-averse funds. Conversely, when the initial allocation to alternative assets is below the optimal level, a temporary suspension of allocation constraints can be welfare-improving. By selling only liquid assets, the relative share of alternative assets increases endogenously, moving the portfolio closer to the optimal allocation while simultaneously avoiding transaction costs. This result demonstrates that the desirability of ex-post flexibility is contingent upon the ex-ante positioning of the portfolio. These findings underscore the importance of linking ex-post decision rules to ex-ante asset allocation design. While ex-post flexibility can mitigate unnecessary costs and improve outcomes following shocks, such flexibility is not unconditional. Rather, it is supported by an appropriately calibrated strategic asset allocation that aligns initial portfolio weights with optimal risk-return trade-offs. In this sense, the study emphasizes that effective ex-post responses are not substitutes for sound ex-ante asset allocation, but complements that depend on the quality of the initial allocation. This study contributes to the literature by providing a structured and tractable framework for evaluating ex-post responses in pension fund asset management under illiquidity and allocation constraints. Unlike existing studies that primarily focus on ex-ante optimization or permanent changes in allocation policy, this paper formalizes the trade-off faced by pension funds when responding to realized shocks within a static strategic allocation framework. From a practical perspective, the results offer clear guidance for pension fund investment committees and outsourced chief investment officer (OCIO) managers. By jointly considering transaction costs, risk preferences, and the alignment between initial and optimal asset allocations, the proposed framework supports more disciplined and transparent ex-post decision-making. Ultimately, the analysis suggests that a model-based approach to ex-post responses can enhance the robustness of pension fund governance by preventing mechanically enforced rebalancing and by promoting economically justified flexibility under well-defined conditions.

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This paper studies within-exchange price dispersion between gold and mini-gold in Korea Exchange (KRX). Although the two products are claims on the same underlying commodity, trade on the same centralized exchange, are quoted in the same currency, and are traded in identical one-gram increments, mini-gold nevertheless trades at persistent discounts relative to gold. Using the full trading history of KRX mini-gold, I show that mini-gold discounts are strongly state dependent with respect to international parity deviations: when domestic gold trades below the international benchmark, the probability of a mini-gold discount rises sharply. I further show that domestic frictions explain the depth of the wedge. Relative illiquidity and mini-gold trading inactivity are both associated with wider spreads, and the pricing of illiquidity is materially stronger in discount states. These results are robust to alternative proxies based on relative participation and OHLC-implied intraday roughness. Taken together, the evidence supports a nested limits-to-arbitrage interpretation in which international dislocations affect the incidence of discount states, while domestic liquidity and participation frictions determine the magnitude of within-exchange price dispersion.

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