Incentives of Stock Option Based Compensation
AbstractWe introduce explicitly the effort as a choice variable in a continuous time utility maximisation framework of an executive who is partly compensated with stock options. We solve the model in the case where the executive is not allowed to trade in the company’s stock but is able to achieve a partial insurance through trading in a correlated market portfolio. We define the executive’s value of the options through a certainty equivalence approach both in the case of European call options and non-standard capped stock options and study the behaviour of the reservation price as relevant parameters change. Copyright Springer Science+Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal Review of Quantitative Finance and Accounting.
Volume (Year): 25 (2005)
Issue (Month): 1 (August)
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Web page: http://springerlink.metapress.com/link.asp?id=102990
incentives; executive stock options; unhedgeable risks; utility maximisation; non-standard options compensation;
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"Optimal Exercise Prices for Executive Stock Options,"
NBER Working Papers
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- Chia-Ying Chan & Ling-Chu Lee & Ming-Chun Wang, 2010. "Employee stock options pricing and the implication of restricted exercise price: evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 34(2), pages 247-271, February.
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