Nonlinearity, correlation and the valuation of employee stock options

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dc.creatorGrasselli, M. R.
dc.date2005-11-09
dc.date.accessioned2026-07-07T12:11:14Z
dc.date.available2026-07-07T12:11:14Z
dc.descriptionWe propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a correlated traded asset to hedge part of their risk. We determine the optimal exercise policy under this conditions and present numerical results showing how both effects can significantly change the value of the option for an employee, as well as its cost for the issuing firm.
dc.description17 pages, 8 figures
dc.identifierhttps://arxiv.org/abs/math/0511234
dc.identifierhttp://arxiv.org/abs/math/0511234
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/210160
dc.subjectStatistics Theory
dc.subjectProbability
dc.subjectStatistical Finance
dc.subject91B16, 91B28
dc.titleNonlinearity, correlation and the valuation of employee stock options
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