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| Tekijä: | Carpenter, J.N. Stanton, R. Wallace, N. |
| Otsikko: | Optimal exercise of executive stock options and implications for firm cost |
| Lehti: | Journal of Financial Economics
2010 : NOV, VOL. 98:2 p. 315-337 |
| Asiasana: | trading costs valuation financial models financial analysis risk stocks |
| Kieli: | eng |
| Tiivistelmä: | This research paper examines the optimal exercise policy for an executive stock option and its implications for option cost, average life, and alternative valuation concepts. According to the proposed model, wealthier or less risk-averse executives exercise later and create greater option cost. However, option cost can decline with volatility. It is shown when there exists a single exercise boundary, yet demonstrate the possibility of a split continuation region. It is also shown 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. |
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