Incentive options are held bymanagers and employees who invariably hold undiversified portfolios with substantial amounts invested in their own company’s common stock. This lack of diversification makes the subjective value of incentive items such as options less than their market value. This paper derives a model for the marginal value of such options or other incentive items. As such, it can ...

introduction: research has asserted mcq items using three response options (one correct answer with two distractors) is comparable to, and possibly preferable over, traditional mcq item formats consisting of four response options (e.g., one correct answer with three distractors), or five response options (e.g., one correct answer with four distractors). some medical educators have also adopted ...

To have a real option means to have the possibility for a certain period to either choose for or against something, without binding oneself up front. The real option rule is that one should invest today only if the net present value is high enough to compensate for giving up the value of the option to wait. Because the option to invest loses its value when the investment is irreversibly made, t...

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...

In this article we show how a project’s option value increases with incremental levels of investment and dis-investment flexibility. We do this by presenting two NPV and seven option pricing models in a strict sequence of increasing flexibility. We illustrate each with numerical examples and determine the maximum value that a project option could ever support. We show that managerial considerat...

We use asymptotic analysis to derive the optimal hedging strategy for an option portfolio hedged using an imperfectly correlated hedging asset with small transaction costs, both fixed per trade and proportional to the value traded. In special cases we opbtain explicit formulae. The hedging strategy involves holding a position in the hedging asset whose value lies between two bounds, which are i...

different areas of modern financial tools and processes activities contain the matters like innovations in financial tools engineering and risk management. derivatives and especially stock exchange option is part of this innovation. among all numerical procedures in calculating the value of derivatives and the risk sensitivity parameters of option, binomial models are widely used. in this stud...

Introduced by Kifer (2000), game options function in the same way as American options with the added feature that the writer may also choose to exercise at which time they must pay out the intrinsic option value of that moment plus a penalty. In Kyprianou (2004) an explicit formula was obtained for the value function of the perpetual put option of this type. Crucial to the calculations which le...

Shogren, J.F. and Crocker, T.D.. 1990. Adaptation and the option value of uncertain environmental resources. Ecol. Econ., 2 : 301-310. Just as ecology has benefited from the economic theory of optimizstion, economics can benefit from the ecological theory of adaptation. We examine the impact of short-term, non-genetic adaptive self-protection on the values individuals attach to uncertain prospe...

An option-pricing model is developed to rank investments that might improve water quality. The model presumes that two investment options exist that have the potential to alter the stochastic drift of a pollutant. The investments have capital and operating costs and are irreversible once constructed. The stochastically evolving pollutant induces stochastic damage. An option-pricing model provid...