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Executive Stock Options and Time Diversification

Author

Listed:
  • Julio Carmona

    (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica)

  • Ángel León

    (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica)

  • Antoni Vaello-Sebastià

    (University of Balear Islands, Dept. Economía de la Empresa)

Abstract

We study the time diversification issue in the context of the optimal asset allocation of an executive with decreasing relative risk aversion preferences, who is granted a package of European stock options. The asset menu for his unrestricted wealth includes both market portfolio and money account.

Suggested Citation

  • Julio Carmona & Ángel León & Antoni Vaello-Sebastià, 2012. "Executive Stock Options and Time Diversification," QM&ET Working Papers 12-16, University of Alicante, D. Quantitative Methods and Economic Theory.
    • Handle: RePEc:ris:qmetal:2012_016
    as

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    References listed on IDEAS

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    1. John H. Cochrane & Jesus Saa-Requejo, 2000. "Beyond Arbitrage: Good-Deal Asset Price Bounds in Incomplete Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 79-119, February.
    2. Tian, Yisong S., 2004. "Too much of a good incentive? The case of executive stock options," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1225-1245, June.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    4. Michael W. Brandt & Amit Goyal & Pedro Santa-Clara & Jonathan R. Stroud, 2005. "A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability," The Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 831-873.
    5. Nicholas Barberis, 2000. "Investing for the Long Run when Returns Are Predictable," Journal of Finance, American Finance Association, vol. 55(1), pages 225-264, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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