Analytic Pricing of Employee Stock Options

Jakša Cvitanić, Zvi Wiener and Fernando Zapatero
Authors registered in the RePEc Author Service: Jaksa Cvitanic ()

The Review of Financial Studies, 2008, vol. 21, issue 2, 683-724

Abstract: We introduce a model that captures the main properties that characterize employee stock options (ESO). We discuss the likelihood of early voluntary ESO exercise, and the obligation to exercise immediately if the employee leaves the firm, except if this happens before options are vested, in which case the options are forfeited. We derive an analytic formula for the price of the ESO and in a case study compare it to alternative methods. The Author 2007. Published by Oxford University Press on behalf of the Society for Financial Studies. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2008
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Citations: View citations in EconPapers (30)

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