Optimal Multiple Stopping Models of Reload Options and Shout Options

Optimal Multiple Stopping Models of Reload Options and Shout Options

The reload provision in an employee stock option entitles its holder to receive one new (reload) option from the employer for each share tendered as payment of strike upon the exercise of the stock option. The number of reloads allowed can be finite or infinite. The shout feature in a call option allows its holder to reset the option’s strike price to the prevailing stock price upon shouting. W...

Optimal stopping and American options

Optimal Multiple-stopping of Linear Diffusions and Swing Options

Despite its crucial importance in the energy markets, the pricing of swing options with multiple exercise rights of the American type has received little attention in the mathematical finance and probability literature. In a first attempt at a theory for these multiple exercise options, Carmona and Touzi [Preprint, available at http://www.crest.fr/pageperso/lfa/touzi/cat03.ps] have recently stu...

Optimal Multiple Stopping and Valuation of Swing Options

The connection between optimal stopping of random systems and the theory of the Snell envelope is well understood, and its application to the pricing of American contingent claims is well known. Motivated by the pricing of swing contracts (whose recall components can be viewed as contingent claims with multiple exercises of American type) we investigate the mathematical generalization of these ...

Valuing reload options

Over the past quarter century, the use of stock options as pay for performance has grown enormously. Option grants now account for 32% of CEO pay—more than twice that of salaries. In addition options are now being granted to many more employees than before. During this same time period, there have been numerous innovations in the features on compensation options. One of these features is the re...