We value UK executive stock options (ESOs) as American options that areawarded conditional on the probability of the holders achieving some performancecriteria. Unlike the standard Black and Scholes (BS) model, which is universally usedboth in the literature and practice, this provides a more...

Ziel dieses Beitrages ist es, die Zusammenhänge zwischen den Binomialmodellen der Operationsbewertung (Replikation bzw. Methode der risikoneutralen Wahrscheinlichkeiten) und dem Black/Scholes Modell aufzuzeigen und zu analysieren...

In this article, we describe the various sorts of American Parisian options and propose valuation formulae. Although there is no closed-form valuation for these products in the non perpetual case, we have been able to reformulate their price as a function of the exercise frontier. In the...

This paper examines the effect of using different option valuation models to calculatethe fair market value of Executive Stock Options (ESOs) granted to executivedirectors of UK firms. Our key objective is to demonstrate empirically that somecompanies will have greater incentive and benefit from...

We test one of the main predictions of the financial flexibility paradigm that expectations about future firm-specific shocks affect the firm's leverage. We extract the expectations of small and large future shocks from the market prices of equity options. We find that expectations for future...

This paper analyzes the market microstructure of the European Climate Exchange, the largest EU ETS trading venue. The ECX captures 2/3 of the screen traded market in EUA and more than 90% in CER. Trading volumes are active, with EUA volume doubling in 2009. Spreads range from € 0.02 to €...

I evaluate a bank's incentives to implement a risk sensitive regulatory capital rule and to invest in improved risk measurement. The decision making is analyzed within a real options framework where optimal policies are derived in terms of threshold levels of risk. I also evaluate the situation...

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...

We develop a continuous-time real options pricing model to study managers’incentives to cheat in the presence of equity-based compensation policies.We show that managers’ incentives to cheat are strongly influenced by theefficiency of the justice. Our model’s main result is that managers...

While in the US stock-based incentives are commonly used since the 50s of the last century, in Germany they were invented only some ten years ago. Even in 1996 firms faced considerable regulatory difficulties when willing to grant such incentives. In the meantime the legal environment has...