Trend Derivatives: Pricing, Hedging, and Application to Executive Stock Options

Leippold, Markus; Syz, Juerg M.

doi:10.2139/ssrn.782786

Cited by 3 publications

(1 citation statement)

References 14 publications

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“…where C denotes the GARCH option price. The use of averaging schemes in ESOs is advocated by Leippold and Syz (2007) and Tian (2013). However, (indexed) AESOs' sensitivity has never been performed in the GARCH framework.…”

Section: Options' Sensitivitymentioning

confidence: 99%

Pricing executive stock options with averaging features under the Heston–Nandi GARCH model

Wang

2019

Journal of Futures Markets

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In this paper, we focus on the pricing issue of four types of executive stock options (ESOs) in the Heston–Nandi generalized autoregressive conditional heteroskedasticity option pricing model. Based on the derived benchmark strike prices in the proposed framework, we obtain the closed‐form pricing formulae for four types of ESOs. In the numerical part, we investigate the sensitivity and cost efficiency of ESOs and suggest that systematic risk (stock β) and the fraction of wealth invested in restricted stock could impede the cost efficiency of ESOs.

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Section: Options' Sensitivitymentioning

confidence: 99%

Pricing executive stock options with averaging features under the Heston–Nandi GARCH model

Wang

2019

Journal of Futures Markets

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The Trend is Your Friend: Absence of Pin Risk in Trend Options and Time Diversification

Leippold

Syz

2005

SSRN Journal

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On the pros and cons of employee stock options: What are the alternatives?

Pukthuanthong¹,

Walker²

2006

COC

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Despite theoretical validity, there is mixed empirical evidence on whether employee stock options align the interests of management and shareholders by turning managers into owners. Yet, recent accounting scandals, excessive payouts, and the public’s call for a proper recognition of stock option grants have produced considerable debate in boardrooms and the financial press about the desirability of using stock options. This paper provides an overview of the empirical research in the field and discusses the advantages and disadvantages of using stock options as part of an employee’s compensation package. In light of the recent accounting scandals, regulatory bodies have been hard pressed to change the accounting treatment and recognition of stock options. As a result, practitioners and academics are increasingly on the lookout for alternative forms of compensation tools. To aid in the ongoing discussion, we propose a number of alternative compensation tools that help alleviate some of the problems inherent in stock options, while still rewarding a manager for his performance and aligning management and shareholder incentives. While there is no clear-cut answer as to what compensation tool is best, our study should provide corporate managers with the necessary insights that are needed to choose the method that most closely meets their objectives. In addition, our study aims to open the door for further academic discussion that is required to address a number of questions that remain unanswered in this area

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Trend Derivatives: Pricing, Hedging, and Application to Executive Stock Options

Cited by 3 publications

References 14 publications

Pricing executive stock options with averaging features under the Heston–Nandi GARCH model

Pricing executive stock options with averaging features under the Heston–Nandi GARCH model

The Trend is Your Friend: Absence of Pin Risk in Trend Options and Time Diversification

On the pros and cons of employee stock options: What are the alternatives?

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