Tests of two optimal incentive models for executive stock options
نویسندگان
چکیده
منابع مشابه
Optimal exercise of executive stock options
In the absence of frictions if a portfolio strategy replicates the payoff of one unit of a claim, an appropriately scaled strategy replicates any amount of the claim. If assets are priced by arbitrage, the value per-unit is invariant to the amount of the asset considered. In particular, in the case of American claims, the optimal exercise time is independent of the amount of the claim that is c...
متن کاملOptimal Exercise of Executive Stock Options and Implications for Valuation
The cost of executive stock options to shareholders has become a focus of attention in ̄nance and accounting. The di±culty is that the value of these options depends on the exercise policies of the executives. Because these options are nontransferable, the usual theory does not apply. We analyze the optimal exercise policy for a utility-maximizing executive and indicate when the policy is chara...
متن کاملValuation of Executive Stock Options
It has been common practice to provide executives of firms with executive stock options as a part of the compensation package; such options are available both in US and Australia. These executive stock options are call options with additional restrictions. Until recently, the executive stock options were not required to be disclosed in the financial reports of the firms. But this has changed du...
متن کاملExecutive Stock Options: Portfolio Effects
Since executives typically receive new grants of stock options (ESOs) each year, longerserving executives often have portfolios of ESOs with differing strikes and maturities. Valuation models for stand-alone ESO grants have shown that trading restrictions, which force executives to bear unhedgeable risk until the options are exercised, induce earlier exercise and hence a lower cost to sharehold...
متن کاملExecutive Exercise Explained: Patterns for Stock Options
It is well documented that executives granted stock options tend to exercise early and in a few large transactions or “blocks”. Standard risk-neutral valuation models cannot explain these patterns, and attempts to capture the exercise behavior of risk averse executives have been limited to the special case of one option. This paper solves for the optimal exercise behavior for a risk averse exec...
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ژورنال
عنوان ژورنال: Corporate Ownership and Control
سال: 2011
ISSN: 1810-3057,1727-9232
DOI: 10.22495/cocv9i1art9