On Valuing Employee Stock Option Plans with the Requisite Service Period Requirement
AbstractThis paper examines issues involving employee stock option plans as a part of employee compensation. In particular, employee stock options requiring a requisite service period are viewed as an option on options and hence, a compound option, as the employee’s future market wage rate is unknown. Non-transferability of employee stock options is overcome by the well-known put-call parity theorem. Difficulties arise, however, if a firm is privately held. The paper derives a simple formula to value equities for privately held firms.
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Bibliographic InfoArticle provided by Pepperdine University, Graziadio School of Business and Management in its journal Journal of Entrepreneurial Finance and Business Ventures.
Volume (Year): 11 (2006)
Issue (Month): 1 (Spring)
Stock Options; Compensation; Incentives;
Find related papers by JEL classification:
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