Valuation of employee stock options using the exercise multiple approach and life tables

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• 作者：T. Kyng^a ; ^{timothy.kyng@mq.edu.au" class="auth_mail" title="E-mail the corresponding author} ; O. Konstandatos^b ; ^{otto.konstandatos@uts.edu.au" class="auth_mail" title="E-mail the corresponding author} ; T. Bienek^c ; ^{tobias.bienek@tum.de" class="auth_mail" title="E-mail the corresponding author}
• 关键词：91G20 ; 62P05
• 刊名：Insurance: Mathematics and Economics
• 出版年：2016
• 出版时间：May 2016
• 年：2016
• 卷：68
• 期：Complete
• 页码：17-26
• 全文大小：814 K

文摘

Employee stock options (ESOs) are common in performance-based employee remuneration. Financial reporting standards such as IFRS2 and AASB2 require public corporations to report on the cost of providing ESOs, and mandate the incorporation of voluntary and involuntary early exercise. In this paper we extend the exercise multiple approach of Hull and White (2004) and decompose the attrition unadjusted voluntary exercise ESO into a gap call option and two partial-time barrier options. We use exit probabilities obtained from empirically determined multiple decrement or life tables to model involuntary early exercise or forfeiture. We provide a new analytic valuation formula which expresses the ESO value in terms of a portfolio of exotic European bivariate power options and which correctly accounts for both voluntary exercise and employee attrition. Recent approaches seek to model employee attrition using a constant hazard rate. Our approach uses an empirically driven actuarial method for incorporating employee attrition in the valuation.