There are 3 versions of this paper. Options have become a major component of corporate compensation.

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Their cost to firms depends on the exercise policies of executives who face hedging constraints. This paper analyzes the optimal policy and option cost for an executive with general concave utility.

We show analytically how the policy and cost vary with risk aversion, wealth, and dividend, and when there exists a single stock price boundary. We also provide an example with a split continuation region, and numerical results on volatility and beta effects. Option value decreases with risk aversion, increases with wealth and hedging opportunities, but can actually decline with volatility.

Stern School of Business 44 West 4th Street New York, NY United States Phone Fax. Haas School of Business Student Services Building Berkeley, CA United States Phone Fax.

Subscribe to this fee journal for more curated articles on this topic. Valuing the Option to Invest in an Incomplete Market. Investment, Hedging, and Consumption Smoothing. By Jianjun Miao and Neng Wang. Investment, Consumption and Hedging under Incomplete Markets. Investment, Consumption, and Hedging Under Incomplete Markets.

By Neng Wang and Jianjun Miao. Are Overconfident CEOs Better Innovators? By David Hirshleifer , Siew Hong Teoh , Optimal Exercise of Executive Stock Options and Implications for Valuation. By Jennifer Carpenter , Richard Stanton , Optimal Exercise of Executive Stock Options and Implications for Firm Cost. By Richard Stanton , Nancy Wallace , Accounting for Risk Aversion, Vesting, Job Termination Risk and Multiple Exercises in Valuation of Employee Stock Options.

By Tim Leung and Ronnie Sircar.

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Download this Paper Open PDF in Browser Share: Using the URL or DOI link below will ensure access to this page indefinitely. Carpenter New York University NYU - Department of Finance Richard Stanton University of California, Berkeley - Finance Group Nancy Wallace University of California, Berkeley - Real Estate Group.

Optimal exercise of executive stock options | SpringerLink

Optimal Exercise of Executive Stock Options and Implications for Firm Cost Number of pages: You are currently viewing this paper. Optimal Exercise of Executive Stock Options and Implications for Firm Cost NYU Working Paper No.

Abstract Options have become a major component of corporate compensation. Carpenter New York University NYU - Department of Finance email Stern School of Business 44 West 4th Street New York, NY United States Phone Fax. Stanton Contact Author University of California, Berkeley - Finance Group email Haas School of Business Student Services Building Berkeley, CA United States Phone Fax.

Wallace University of California, Berkeley - Real Estate Group email Berkeley, CA United States. Download this Paper Open PDF in Browser.

Related eJournals Corporate Finance: Derivatives eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS. Recommended Papers Valuing the Option to Invest in an Incomplete Market By Vicky Henderson Investment, Hedging, and Consumption Smoothing By Jianjun Miao and Neng Wang Investment, Consumption and Hedging under Incomplete Markets By Jianjun Miao and Neng Wang Investment, Consumption, and Hedging Under Incomplete Markets By Neng Wang and Jianjun Miao Are Overconfident CEOs Better Innovators?

Optimal Exercise of Executive Stock Options and Implications for Valuation By Jennifer Carpenter , Richard Stanton , Optimal Exercise of Executive Stock Options and Implications for Firm Cost By Richard Stanton , Nancy Wallace , Optimal Exercise of Executive Stock Options and Implications for Firm Cost By Jennifer Carpenter , Richard Stanton , Accounting for Risk Aversion, Vesting, Job Termination Risk and Multiple Exercises in Valuation of Employee Stock Options By Tim Leung and Ronnie Sircar Accounting for Risk Aversion, Vesting, Job Termination Risk and Multiple Exercises in Valuation of Employee Stock Options By Tim Leung and Ronnie Sircar.

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