Executive Stock Option Pricing in China under Stochastic Volatility

Terence Tai Leung Chong, Yue Ding and Yong Li ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, on the basis of stochastic volatility (SV) models, we extend the approach of option pricing for executive stock options (ESOs) under FAS 123. Based on this extension, a sample of Chinese listed companies’ ESOs are priced. We analyze the effect of the some important financial variables on the implementation of ESOs. It is found that in China, firms with higher market risk and larger size are likely to have a higher ESO proportion in their executive incentive plans. The effects of the book-to market ratio, stock price volatility, executive shareholding proportion, and the leverage ratio are also examined.

Keywords: Bayesian analysis; Executive stock options; FAS 123; Option pricing; SV models. (search for similar items in EconPapers)
JEL-codes: G3 (search for similar items in EconPapers)
Date: 2015-02-27
New Economics Papers: this item is included in nep-cna and nep-tra
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Executive Stock Option Pricing in China Under Stochastic Volatility (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:63397

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