Optimal Exercise of Executive Stock Options and Implications for Firm Cost

摘要：

The cost of executive stock options to shareholders has become a focus of attention in finance and accounting. The difficulty is that the value of these options depends on the exercise policies of the executives. Because these options are nontransferable, the usual theory does not apply. We analyze the optimal exercise policy for a general utility-maximizing executive and indicate when the policy is characterized by a critical stock price boundary. We provide a counterexample in which the executive exercises at low and high stock prices but not in between. We show how the policy varies with risk aversion, wealth, and volatility and explore implications for option value. For example, option value can decline as volatility rises.

作者: Jennifer N. Carpenter Richard Stanton Nancy Wallace

作者单位: New York University U.C.Berkeley

会议类型: 国际会议

会议名称: 2007年中国金融国际年会

会议地点: 成都

会议语种:英文

页码: 1-26

在线出版日期: 2007-07-09（万方平台首次上网日期，不代表论文的发表时间）