Recover the Missing Dimension of Managerial Risk of Stockholdings and Option Grants

George Y. Nie
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George Y. Nie: Concordia University

No rcj8t_v1, SocArXiv from Center for Open Science

Abstract: Nie (2023) suggests that Markowitz (1952) asset risk misses the indispensable dimension of time length of asset holder’s risk, thereby preventing scholars from measuring managerial risk of stockholdings and option grants bound with untradability. This study captures managerial risk as the risk over the (in)visible time lengths of untradability of the underlying assets and their outcomes until they turn fully tradable. Nie (2023) argues that asset risk causes volatility, but not vice versa, implying that Black and Scholes (1973) effectively price options as risk-free. Our option value includes the underlying stock and a deferred payment weighted on their probabilities at maturity.

Date: 2023-03-04
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:rcj8t_v1

DOI: 10.31219/osf.io/rcj8t_v1

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