Journal ArticleDOI
The exercise and valuation of executive stock options
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TLDR
In this paper, a simple extension of the ordinary American option model which introduces random, exogenous exercise and forfeiture predicts actual exercise times and payoffs just as well as an elaborate utility-maximizing model that explicitly accounts for the nontransferability of options.About:
This article is published in Journal of Financial Economics.The article was published on 1998-05-01. It has received 356 citations till now. The article focuses on the topics: Valuation of options & Employee stock option.read more
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Managerial incentives and risk-taking ☆
TL;DR: This paper found that higher sensitivity of CEO wealth to stock volatility (vega) implements riskier policy choices, including relatively more investment in R&D, less investment in PPE, more focus, and higher leverage.
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CEO Overconfidence and Corporate Investment
Ulrike Malmendier,Geoffrey Tate +1 more
TL;DR: In this paper, the authors argue that managerial overconfidence can account for corporate investment distortions and find that investment of overconfident CEOs is significantly more responsive to cash flow, particularly in equity-dependent firms.
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Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction
Ulrike Malmendier,Geoffrey Tate +1 more
TL;DR: In this article, the authors analyzed the impact of CEO overconfidence on mergers and acquisitions and found that overconfident CEOs over-estimate their ability to generate returns, both in their current firm and in potential takeover targets.
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Executive Compensation as an Agency Problem
TL;DR: In this paper, the authors provide an overview of the main theoretical elements and empirical underpinnings of a managerial power approach to executive compensation, arguing that managers wield substantial influence over their own pay arrangements and they have an interest in reducing the saliency of the amount of their pay and the extent to which pay is de-coupled from managers' performance.
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Executive Compensation as an Agency Problem
TL;DR: Bebchuk and Fried as discussed by the authors developed a full account of how managerial influence shapes the executive compensation landscape in a forthcoming book, which builds substantially on a long article written jointly with David Walker.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Book
Theory of rational option pricing
TL;DR: In this paper, the authors deduced a set of restrictions on option pricing formulas from the assumption that investors prefer more to less, which are necessary conditions for a formula to be consistent with a rational pricing theory.
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Optimum consumption and portfolio rules in a continuous-time model☆
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
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Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case
TL;DR: In this paper, the combined problem of optimal portfolio selection and consumption rules for an individual in a continuous-time model was examined, where his income is generated by returns on assets and these returns or instantaneous "growth rates" are stochastic.