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Executive Stock Options (ESOs) are modified American options that cannot be valued using standard methods. With a few exceptions, the literature has discussed the ESO fair value by assuming unpredictable stock returns which are not supported by the available empirical evidence. In this paper we...
Persistent link: https://www.econbiz.de/10009358421
objective valuation distribution when there is uncertainty about the employment shock parameter. Finally, the role of ESOs in … (ESOs) under exogenous employment shocks driven by an independent Poisson process. Within this setup,we obtain the executive …
Persistent link: https://www.econbiz.de/10008602637
Le thème central de cet ouvrage porte sur l'adéquation des représentations théoriques du comportement décisionnel des agents et sur ses implications pour la pertinence des mesures de la juste valeur des instruments financiers. L'ouvrage vise en premier lieu à mettre en perspective le rôle...
Persistent link: https://www.econbiz.de/10011072712
We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options...
Persistent link: https://www.econbiz.de/10005385281
The majority of risk adjusted performance measures (RAPM) currently in use – e.g., Treynor ratio, (?/?)) ratio, Omega index, RoVaR, ‘coherent’ preference criteria, etc. – are incompat- ible with any sensible utility function and would be best avoided. We argue instead for the assessment...
Persistent link: https://www.econbiz.de/10010938095
Generalizing a result by Cox and Leland (2000) and Vanduffel et al. (2009), this note shows that risk-averse investors with fixed planning horizon prefer path-independent payoffs in any financial market if the pricing kernel is a function of the underlying’s price at the end of the planning...
Persistent link: https://www.econbiz.de/10010577962
We provide a necessary and a sufficient condition on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for...
Persistent link: https://www.econbiz.de/10005018277
In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or perfect capital markets. However in most situations, corporate executives face incomplete markets either because they receive compensation packages...
Persistent link: https://www.econbiz.de/10005612052
This discussion paper resulted in a publication in the 'Journal of Economics and Management Strategy', forthcoming.<P> Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical...</p>
Persistent link: https://www.econbiz.de/10011257274
We analyze the payout channel choice of listed UK firms and examine whether the choice between dividends, share repurchases, a combination of payout channels, or complete earnings retention is affected by investor sentiment, taxation, major shareholder ownership, and in particular the CEO’s...
Persistent link: https://www.econbiz.de/10011144460