Analytic Pricing of Employee Stock Options
AbstractWe introduce a model that captures the main properties that characterize employee stock options (ESO). We discuss the likelihood of early voluntary ESO exercise, and the obligation to exercise immediately if the employee leaves the firm, except if this happens before options are vested, in which case the options are forfeited. We derive an analytic formula for the price of the ESO and in a case study compare it to alternative methods. The Author 2007. Published by Oxford University Press on behalf of the Society for Financial Studies. All rights reserved. For permissions, please e-mail: firstname.lastname@example.org, Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal Review of Financial Studies.
Volume (Year): 21 (2008)
Issue (Month): 2 (April)
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- Carmona, Julio & León, Angel & Vaello-Sebastià, Antoni, 2011.
"Pricing executive stock options under employment shocks,"
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- Menachem Abudy & Simon Benninga, 2011. "Taxation and the value of employee stock options," International Journal of Managerial Finance, Emerald Group Publishing, vol. 7(1), pages 9-37, February.
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