کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
959719 929352 2010 23 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Optimal exercise of executive stock options and implications for firm cost
موضوعات مرتبط
علوم انسانی و اجتماعی مدیریت، کسب و کار و حسابداری حسابداری
پیش نمایش صفحه اول مقاله
Optimal exercise of executive stock options and implications for firm cost
چکیده انگلیسی

This paper conducts a comprehensive study of the optimal exercise policy for an executive stock option and its implications for option cost, average life, and alternative valuation concepts. The paper is the first to provide analytical results for an executive with general concave utility. Wealthier or less risk-averse executives exercise later and create greater option cost. However, option cost can decline with volatility. We show when there exists a single exercise boundary, yet demonstrate the possibility of a split continuation region. We also show that, for constant relative risk averse utility, the option value does not converge to the Black and Scholes value as the correlation between the stock and the market portfolio converges to one. We compare our model's option cost with the modified Black and Scholes approximation typically used in practice and show that the approximation error can be large or small, positive or negative, depending on firm characteristics.

ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Journal of Financial Economics - Volume 98, Issue 2, November 2010, Pages 315–337
نویسندگان
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