The Valuation of Executive Stock Options in an Intensity-Based Framework

Peter Carr and Vadim Linetsky

Review of Finance, 2000, vol. 4, issue 3, 211-230

Abstract: This paper presents a general intensity-based framework to value executive stock options (ESOs). It builds upon the recent advances in the credit risk modeling arena. The early exercise or forfeiture due to voluntary or involuntary employment termination and the early exercise due to the executive’s desire for liquidity or diversification are modeled as an exogenous point process with random intensity dependent on the stock price. Two analytically tractable specifications are given where the ESO value, expected time of exercise or forfeiture, and the expected stock price at the time of exercise or forfeiture are calculated in closed-form. JEL classification: G13, G39, M41.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1011441824560 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:4:y:2000:i:3:p:211-230.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().