More than half of S&P 500 CEOs receive options annually, however extant valuation models have not accounted for portfolio considerations. We show the inability of executives to diversify means portfolio effects matter: exercise thresholds and shareholder costs are lower than for stand-alone...

We consider the optimal exercise of a portfolio of American call options in an incomplete market. Options are written on a single underlying asset but may have different characteristics of strikes, maturities and vesting dates.Our motivation is to model the decision faced by an employee who is...

Empirical evidence shows that backdating of executive stock option grants was prevalent, particularly at firms with highly volatile stock prices. Executives who have the opportunity to backdate should take this into account in their valuation. We quantify the value to a risk averse executive of...

The technical uncertainty associated with the cost to completion of an Ramp;D project, whilst idiosyncratic, is also inherently unhedgeable. We extend existing real options models of Ramp;D investment to incorporate the cost of bearing this unhedgeable risk and find it decreases risk-averse...

This paper uses asymptotic analysis to derive optimal hedging strategies for option portfolios hedged using an imperfectly correlated hedging asset with small fixed and/or proportional transaction costs, obtaining explicit formulae in special cases. This is of use when it is impractical to hedge...

We analyse the incentive impact of bank capital regulation in a model with endogenous capital, assuming regulators randomly audit banks and require undercapitalised banks either to bear the fixed cost of new issue or to liquidate. Forward looking banks with sufficient franchise value maintain a...

We analyse the incentive impact of bank capital regulation in a model with endogenous capital, assuming regulators randomly audit banks and require undercapitalised banks either to bear the fixed cost of new issue or to liquidate. Forward looking banks with sufficient franchise value maintain a...