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Executive Stock Option Pricing in China Under Stochastic Volatility

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

Journal of Futures Markets, 2015, vol. 35, issue 10, 953-960

Abstract: In this article, 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. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 35:953–960, 2015

Date: 2015
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