The Valuation and Exercise of Executive Stock Options

摘要: Much has been made of the potential for hedging restrictions to reduce value executive stock options. We investigate this issue by comparing a rational utility-maximizing model that incorporates both and an endogenous departure decision naive value-maximizing with exogenous rate. While researchers mainly use these kinds models compute option values, we also generate forecasts observable variables, size timing payoffs exercised options, annual rate at which options are canceled. show provides just as good description actual exercise patterns executives in sample NYSE AMEX firms. The more parsimonious may, there, be better purpose valuation. incorporation standard America not only aligns predicted cancellation patterns, but reduces about quarter.