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Company stock rewards on the evaluation of investor’s remuneration package with stochastic income

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  • Kebareng I. Moalosi-Court

    (Department of Mathematics and Statistical Sciences, Botswana International University of Science and Technology, Palapye, Botswana)

  • Edward M. Lungu

    (Department of Mathematics and Statistical Sciences, Botswana International University of Science and Technology, Palapye, Botswana)

  • Elias R. Offen

    (#x2020;University of Botswana, Gaborone, Botswana)

Abstract

We consider a risk averse investor as are who has a bond, is rewarded with α units of company stock option and is endowed with stochastic income. First, we derive and analyzes the optimal investment threshold and investment value function of the investor. Second, we determine a remuneration package and the utility indifference pricing of this risk averse investor and analyze the results for two utility functions; the exponential and logarithmic utilities. From these results, we conclude that the more units of company stock the investor receives, the higher the chances of increasing the total wealth or profit.

Suggested Citation

  • Kebareng I. Moalosi-Court & Edward M. Lungu & Elias R. Offen, 2019. "Company stock rewards on the evaluation of investor’s remuneration package with stochastic income," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-16, June.
    • Handle: RePEc:wsi:ijfexx:v:06:y:2019:i:02:n:s2424786319500178
    DOI: 10.1142/S2424786319500178
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    References listed on IDEAS

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