Photo by scohron from unsplash
In this paper, we investigate executive stock options with endogenous departure and time-varying variances. We use a “Generalized Autoregressive Conditional Heteroskedasticity” process to capture the variance process of the log… Click to show full abstract
In this paper, we investigate executive stock options with endogenous departure and time-varying variances. We use a “Generalized Autoregressive Conditional Heteroskedasticity” process to capture the variance process of the log stock price. In addition, we take into consideration the departure risk of the executive and assume that the probability of remaining employed has a power form of stock price ratios. After deriving the closed-form pricing formulae of executive stock options, we illustrate the effects of the departure risk on the values of executive stock options.
Journal Title: Probability in the Engineering and Informational Sciences
Year Published: 2017
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!