This article examines the pricing and hedging of mandatory convertible bonds on the US market using daily market prices for a period of 498 trading days resulting in a sample of over 14,600 daily price observations. We explore the pricing and hedging performance based on a simple contingent...

In this paper, we show how employee stock options can be valued under the new reporting standards IFRS 2 and FASB 123 (revised) for share-based payments. Both standards require companies to expense employee stock options at fair value. We propose a new valuation model, referred to as Enhanced...

We investigate different methods for computing value-at-risk for nonlinear portfolios by applying them to portfolio compositions containing various option structures. Surprisingly, even for optioned portfolios, the results from relatively crude approximations such as the delta-normal method do...

In this numerical analysis of models for valuing employee stock options, the focus is on the impact of a model on the resulting option prices and the sensitivity of pricing differences between models with respect to changes in the parameters. For most models, the price reduction relative to...

We report our investigation of the relationship between statistical measures of tracking error and asset allocation restrictions expressed as admissible weight ranges. Tracking errors are typically calculated as annualized second moments of return differentials between a portfolio and a...