Valuing Executive Stock Options: Performance Hurdles, Early Exercise and Stochastic Volatility
Philip Browna, b, Alex Szimayerc
aAustralian School of Business, University of New South Wales, Sydney, 2052, Australia
bUWA Business School, University of Western Australia, Crawley, 6009, Australia
cDepartment of Financial Mathematics, Fraunhofer ITWM, Fraunhofer-Platz 1, 67663 Kaiserslautern, Germany
Abstract
Accounting standards require companies to assess the fair value of any stock options granted to executives and employees. We develop a model for accurately valuing executive and employee stock options, focusing on performance hurdles, early exercise and uncertain volatility. We apply the model in two case studies and show that properly computed ...
Get Financial Accounting and Equity Markets now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.