Employee stock option exercise behavior and valuation

Authors
Ellis, John A.
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Other Contributors
Francis, Bill
Teall, John L., 1958-
Ye, Pengfei
Hasan, Iftekhar
Issue Date
2013-05
Keywords
Management
Degree
PhD
Terms of Use
This electronic version is a licensed copy owned by Rensselaer Polytechnic Institute, Troy, NY. Copyright of original work retained by author.
Full Citation
Abstract
Observed employee stock option (ESO) exercise behavior differs from that of similar tradable stock options (TSO). ESOs are exercised earlier than traditional option valuation models predict. A general literature conclusion is ESO behavioral differences are due to ESO trading restrictions compromising ESO holder diversification and causing risk-averse ESO holders to value ESOs below similar TSO market values. I present a new theory of ESO exercise behavior and valuation that is not dependent on compromised diversification arguments.
Description
May 2013
School of Management
Department
Lally School of Management and Technology
Publisher
Rensselaer Polytechnic Institute, Troy, NY
Relationships
Rensselaer Theses and Dissertations Online Collection
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