Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/159299 
Year of Publication: 
2003
Series/Report no.: 
Quaderni - Working Paper DSE No. 458
Publisher: 
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
Abstract: 
We introduce explicitly the effort as a choice variable in a continuous time utility maximisation framework of an executive who is partly compensated with stock options. We solve the model in the case where the executive is not allowed to trade in the company's stock but is able to achieve a partial insurance through trading in a correlated market portfolio. We define the executive's value of the options through a certainty equivalence approach both in the case of European call options and nonstandard capped stock options and study the behaviour of the reservation price as relevant parameters change.
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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