On Valuing Employee Stock Option Plans with the Requisite Service Period Requirement

Thomas A. Rhee
Additional contact information
Thomas A. Rhee: California State University, Long Beach

Journal of Entrepreneurial Finance, 2006, vol. 11, issue 1, 39-50

Abstract: This paper examines issues involving employee stock option plans as a part of employee compensation. In particular, employee stock options requiring a requisite service period are viewed as an option on options and hence, a compound option, as the employee’s future market wage rate is unknown. Non-transferability of employee stock options is overcome by the well-known put-call parity theorem. Difficulties arise, however, if a firm is privately held. The paper derives a simple formula to value equities for privately held firms.

Keywords: Stock Options; Compensation; Incentives (search for similar items in EconPapers)
JEL-codes: J33 M12 M13 M52 (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations:

Downloads: (external link)
http://jefsite.org/RePEc/pep/journl/jef-2006-11-1-e-rhee.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pep:journl:v:11:y:2006:i:1:p:39-50

Access Statistics for this article

More articles in Journal of Entrepreneurial Finance from Pepperdine University, Graziadio School of Business and Management Contact information at EDIRC.
Bibliographic data for series maintained by Craig Everett ().