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| Author | : Florian Wolff |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 263 |
| Release | : 2012-12-06 |
| Genre | : Business & Economics |
| ISBN | : 3322818497 |
Florian Wolff analyses how executives perceive their stock options and how their personal expectations and risk preferences affect the value they assign to them. He shows that stock options may be worth their money because people behave irrationally.
| Author | : John Joseph Stansfield |
| Publisher | : |
| Total Pages | : 282 |
| Release | : 1996 |
| Genre | : Stock options |
| ISBN | : |
This dissertation investigates the effects of a variety of parameters on the value of Executive Stock Options (ESOs) in a 20-period binomial setting. There are eight parameters: the vesting schedule, reset policy, maturity, employee risk aversion, the degree of non-option wealth, volatility, and the expected return on the underlying shares. The results indicate that many of the parameters previously thought to have dramatic impacts on ESO value (e.g. risk aversion) tend to not have a very large impact once reasonable estimates are used for the degree of non-option wealth. The contribution to the literature is two-fold. First, it entails clarifying the role non-option wealth plays in determining the level of risk aversion displayed by employees. Second, it entails modeling the effects of the reset provision on the value of executive stock options, which until now has escaped notice. In light of the findings of this research, FASB's recommendation to use currently available option pricing methodology such as the Black-Scholes model to estimate the fair value of an ESO grant is likely to yield conservative results.
| Author | : Gurupdesh S. Pandher |
| Publisher | : |
| Total Pages | : 13 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Executive stock option (ESO) grants have a number of important features that do not conform with the Black-Scholes model. This paper presents a risk-neutral model for valuing such options where the holder is exposed to multiple severance risks (e.g. termination with cause, without cause, mortality) with varying cause-contingent ex-severance payoffs and stock holding restrictions. We find that Black-Scholes significantly overestimates the cost of ESOs to the firm (e.g. 28-39% for a severance rate of 5%) and the bias is inversely related to volatility. For valuation, we construct a multi-severance binomial ESO (MSB-ESO) model and identify the corresponding multi-severance partial differential equation. The severance event is modeled using a flexible doubly stochastic Poisson process which permits rich information structures between state variables and the severance event to be endogenously captured in the valuation.
| Author | : Frederick D. Lipman |
| Publisher | : Prima Lifestyles |
| Total Pages | : 0 |
| Release | : 2001 |
| Genre | : Employee stock options |
| ISBN | : 9780761533825 |
Numerous private and public companies offer stock option plans every year to motivate, retain, and reward employees. But implementing the right stock option plan can be a complex and daunting undertaking, without the proper guidance.The Complete Guide to Employee Stock Optionsunravels the mystery of creating a meaningful equity compensation plan for employees that is favorable for the business. Author and attorney Frederick D. Lipman describes in complete detail the legal, operational, and motivational aspects of developing a stock option program, whether it's for the new start-up looking to attract top talent or the venerable company looking for ways to reward its best performing employees. Readers will discover how to: * Understand the pros and cons of different option plans* Implement the right plan to meet the company's future plans* Motivate key employees with equity compensation* Minimize the risk of losing equity in a volatile market* And much moreThis book also includes useful information for employees who want to understand what their stock options mean and how to maximize their profitability. Complete wi
| Author | : Jennifer N. Carpenter |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 1998* |
| Genre | : Executives |
| ISBN | : |
| Author | : Angel Leon |
| Publisher | : |
| Total Pages | : |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
We present an algorithm that merges a certainty-equivalence framework with the least-squares Monte Carlo algorithm to obtain the executive stock option (ESO) value for a risk-averse and undiversified agent. We account for the difference between executive's value and firm cost of the ESO. We show how early-exercise decisions depend on executive's preferences and its diversification degree. Because of the algorithm flexibility, it allows for multiple state-variables. As an example, we consider the case of indexed ESOs revealing a significant improvement in terms of executive's discount respect to fixed strike ESOs.
| Author | : Jennifer N. Carpenter |
| Publisher | : |
| Total Pages | : 22 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
The cost of executive stock options to shareholders has become a focus of attention in finance and accounting. The difficulty 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 characterized by a critical stock price boundary. We provide a counterexample in which the executive exercises at low and high stock prices but not in between. We show how the policy varies with risk aversion, wealth, and volatility and explore implications for option value. For example, option value can decline as volatility rises.
| Author | : Lester Barenbaum |
| Publisher | : American Bar Association |
| Total Pages | : 146 |
| Release | : 2007 |
| Genre | : Business & Economics |
| ISBN | : 9781590317907 |
Over 14 million American workers receive employee stock options, making it likely that the issue will arise in an upcoming divorce case. This handy, practice-focused guide provides comprehensive guidance on the valuation, taxation, and distribution of stock options in divorce. It includes sample provisions for property settlement agreements, a 50-state survey of all reported options cases, checklists, charts, glossary, and CD-ROM of appendices.
