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EQUITY INVESTMENTS

How to Value Employee Stock Options

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Pages 114-119 | Published online: 02 Jan 2019

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Read on this site (8)

Loïc Belze, François Larmande & Lorenz Schneider. (2020) Transaction Costs, Option Prices, and Model Risk in Fair Value Accounting. European Accounting Review 29:2, pages 201-232.
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Sumon C. Mazumdar, Vikram Nanda & Rahul Surana. (2009) Using Auctions to Price Employee Stock Options: The Case of Zions Bancorporation ESOARS. Financial Analysts Journal 65:6, pages 79-99.
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ChrisK. Anderson & Neil Brisley. (2009) Employee Stock Options: An Up-and-Out Protected Barrier Call. Applied Mathematical Finance 16:4, pages 347-352.
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Neil Brisley & Chris K. Anderson. (2008) Employee Stock Option Valuation with an Early Exercise Boundary. Financial Analysts Journal 64:5, pages 88-100.
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Thomas Gerstner & Markus Holtz. (2008) Valuation of Performance‐Dependent Options. Applied Mathematical Finance 15:1, pages 1-20.
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D Taylor & W van Zyl. (2008) Hedging employee stock options and the implications for accounting standards. Investment Analysts Journal 37:67, pages 29-36.
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Brian G. M. Main. (2006) The ABI guidelines for share-based incentive schemes: setting the hurdle too high?. Accounting and Business Research 36:3, pages 191-205.
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Manuel Ammann & Ralf Seiz. (2004) Valuing Employee Stock Options: Does the Model Matter?. Financial Analysts Journal 60:5, pages 21-37.
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Articles from other publishers (93)

Vasiliki Athanasakou, Daniel Ferreira & Lisa Goh. (2022) Changes in CEO stock option grants: A look at the numbers. Journal of Corporate Finance 75, pages 102226.
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Raden Gemalla Rachma Dewi Wiratmadja, Erwinna Chendra, Liem Chin & Agus Sukmana. Valuing employee stock options (ESOs) for stock price which considers the existence of dividend payments and non-constant interest rates using lattice method. Valuing employee stock options (ESOs) for stock price which considers the existence of dividend payments and non-constant interest rates using lattice method.
Dwight StewardDwight Steward. 2022. Economic Losses and Mitigation after an Employment Termination. Economic Losses and Mitigation after an Employment Termination 75 87 .
Mariya Gubareva. (2021) How to estimate expected credit losses – ECL – for provisioning under IFRS 9. The Journal of Risk Finance 22:2, pages 169-190.
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Andreas Schueler. (2020) Executive Compensation and Company Valuation. Abacus 57:2, pages 297-324.
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TIM LEUNG & YANG ZHOU. (2020) A TOP-DOWN APPROACH FOR THE MULTIPLE EXERCISES AND VALUATION OF EMPLOYEE STOCK OPTIONS. International Journal of Theoretical and Applied Finance 23:02, pages 2050004.
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Stefan Kanne & Marliese Uhrig‐Homburg. (2018) Employee stock options with performance conditions: do commonly used valuation heuristics work?. Accounting & Finance 60:1, pages 373-407.
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Otto Konstandatos. (2020) Fair-value analytical valuation of reset executive stock options consistent with IFRS9 requirements. Annals of Actuarial Science 14:1, pages 188-218.
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Erwinna Chendra & Kuntjoro A. Sidarto. (2019) An improved of Hull–White model for valuing Employee Stock Options (ESOs). Review of Quantitative Finance and Accounting 54:2, pages 651-669.
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Stephen LynnStephen Lynn. 2020. Valuation for Accountants. Valuation for Accountants 11 69 .
JENNIFER N. CARPENTER, RICHARD STANTON & NANCY WALLACE. (2019) Employee Stock Option Exercise and Firm Cost. The Journal of Finance 74:3, pages 1175-1216.
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E Chendra, L Chin & A Sukmana. (2018) Pricing Employee Stock Options (ESOs) with Random Lattice. IOP Conference Series: Materials Science and Engineering 335, pages 012041.
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Andreas Schüler. (2018) Aktienbasierte erfolgsabhängige Entlohnung & UnternehmensbewertungShare Based Compensation & Valuation. Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 70:1-2, pages 125-151.
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Toshikazu Kimura. (2018) AN APPROXIMATE BARRIER OPTION MODEL FOR VALUING EXECUTIVE STOCK OPTIONS. Journal of the Operations Research Society of Japan 61:1, pages 110-131.
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Yi Fu, Baojun Bian, Jizhou Zhang & Dirk Linowski. (2018) THE OPTIMAL EXECUTION STRATEGY OF EMPLOYEE STOCK OPTIONS. Journal of Applied Analysis & Computation 8:4, pages 1122-1142.
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Alexander Merz. (2017) What have we learned from SFAS 123r and IFRS 2? A review of existing evidence and future research suggestions. Journal of Accounting Literature 38:1, pages 14-33.
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Ming-Cheng Wu, I-Cheng Lin & Yi-Ting Huang. (2016) Managing Employee Stock Option Expense: A Fair Value Approach. Australian Accounting Review 26:4, pages 429-438.
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T. Kyng, O. Konstandatos & T. Bienek. (2016) Valuation of employee stock options using the exercise multiple approach and life tables. Insurance: Mathematics and Economics 68, pages 17-26.
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Terence Tai Leung Chong, Yue Ding & Yong Li. (2015) Executive Stock Option Pricing in China Under Stochastic Volatility. Journal of Futures Markets 35:10, pages 953-960.
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Susana Álvarez-Díez, J. Samuel Baixauli-Soler & María Belda-Ruiz. (2013) Are we using the wrong letters? An analysis of executive stock option Greeks. Central European Journal of Operations Research 22:2, pages 237-262.
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John D. Finnerty. (2014) Modifying the Black-Scholes-Merton model to calculate the cost of employee stock options. Managerial Finance 40:1, pages 2-32.
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Ming-Cheng Wu & I-Cheng Lin. (2013) Determining fair values of performance-vested and forfeiture-embedded employee stock options. Accounting & Finance 53:4, pages 1083-1106.
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Menachem Abudy & Simon Benninga. (2013) Non-marketability and the value of employee stock options. Journal of Banking & Finance 37:12, pages 5500-5510.
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Ken Peasnell. (2013) Discussion of “Financial reporting for employee stock options: liabilities or equity”. Review of Accounting Studies 18:3, pages 683-691.
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Erwinna Chendra, Kuntjoro Adji Sidarto, Dila Puspita, Muhammad Syamsuddin & Siska Lismayanti. (2013) On the modeling of employee voluntary early exercise for the valuation of Employee Stock Options. On the modeling of employee voluntary early exercise for the valuation of Employee Stock Options.
Charles Chang, Li-jiun Chen & Cheng-der Fuh. (2013) The Pricing of Risk and Sentiment: A Study of Executive Stock Options. Financial Management 42:1, pages 79-99.
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Olaf Korn, Clemens Paschke & Marliese Uhrig-Homburg. (2011) Robust stock option plans. Review of Quantitative Finance and Accounting 39:1, pages 77-103.
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Chun-Hua Tang. (2012) Revisiting the incentive effects of executive stock options. Journal of Banking & Finance 36:2, pages 564-574.
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Don M. Chance & Tung-Hsiao Yang. (2012) The Tradeoff Between Compensation and Incentives in Executive Stock Options. Quarterly Journal of Finance 01:04, pages 733-766.
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Pete H. Oppenheimer. (2011) Legal and accounting issues of manipulating the timing of stock option grants. Journal of Financial Crime 18:1, pages 63-75.
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Julio Carmona, Angel León & Antoni Vaello-Sebastià. (2011) Pricing executive stock options under employment shocks. Journal of Economic Dynamics and Control 35:1, pages 97-114.
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Toshikazu Kimura. (2010) Valuing executive stock options: A quadratic approximation. European Journal of Operational Research 207:3, pages 1368-1379.
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Jennifer N. Carpenter, Richard Stanton & Nancy Wallace. (2010) Optimal exercise of executive stock options and implications for firm cost. Journal of Financial Economics 98:2, pages 315-337.
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Andrew Ang & Nicolas P.B. Bollen. (2010) Locked Up by a Lockup: Valuing Liquidity as a Real Option. Financial Management 39:3, pages 1069-1096.
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Vicky Henderson & Jia Sun. 2010. Encyclopedia of Quantitative Finance. Encyclopedia of Quantitative Finance.
Chia-Ying Chan, Ling-Chu Lee & Ming-Chun Wang. (2010) Employee stock options pricing and the implication of restricted exercise price: evidence from Taiwan. Review of Quantitative Finance and Accounting 34:2, pages 247-271.
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Robert W. Kolb & James A. OverdahlRobert W. Kolb. 2009. Financial Derivatives. Financial Derivatives 211 220 .
Feng-Yu Liao & Yuh-Dauh Lyuu. (2009) An expanded model for the valuation of employee stock options. Journal of Futures Markets 29:8, pages 713-735.
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Zacharias Sautner & Martin Weber. (2009) HOW DO MANAGERS BEHAVE IN STOCK OPTION PLANS? CLINICAL EVIDENCE FROM EXERCISE AND SURVEY DATA. Journal of Financial Research 32:2, pages 123-155.
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Angel León & Antoni Vaello-Sebastià. (2009) American GARCH employee stock option valuation. Journal of Banking & Finance 33:6, pages 1129-1143.
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MAX SKIPPER & PETER BUCHEN. (2009) A VALUATION FORMULA FOR MULTI-ASSET, MULTI-PERIOD BINARIES IN A BLACK–SCHOLES ECONOMY. The ANZIAM Journal 50:4, pages 475-485.
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Tim Leung & Ronnie Sircar. (2009) ACCOUNTING FOR RISK AVERSION, VESTING, JOB TERMINATION RISK AND MULTIPLE EXERCISES IN VALUATION OF EMPLOYEE STOCK OPTIONS. Mathematical Finance 19:1, pages 99-128.
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Matheus Grasselli & Vicky Henderson. (2009) Risk aversion and block exercise of executive stock options. Journal of Economic Dynamics and Control 33:1, pages 109-127.
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Charles Chang, Cheng-Der Fuh & Ya-Hui Hsu. (2008) ESO compensation: The roles of default risk, employee sentiment, and insider information. Journal of Corporate Finance 14:5, pages 630-641.
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Stephen G. Sapp. (2008) The Impact of Corporate Governance on Executive Compensation. European Financial Management 14:4, pages 710-746.
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Patrick J. Dennis & Richard J.. RendlemanJrJr. (2008) Valuing Multiple Employee Stock Options Issued by the Same Company. The Journal of Derivatives 16:1, pages 44-69.
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Marco Pagani & Themis D Pantos. (2008) Alternative theoretical models for ESOs valuation: Further evidence. Journal of Derivatives & Hedge Funds 14:2, pages 150-155.
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Jakša Cvitanić, Zvi Wiener & Fernando Zapatero. (2008) Analytic Pricing of Employee Stock Options. Review of Financial Studies 21:2, pages 683-724.
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Ronnie Sircar & Wei Xiong. (2007) A general framework for evaluating executive stock options. Journal of Economic Dynamics and Control 31:7, pages 2317-2349.
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Geoffrey Poitras. (2007) Accounting standards for employee stock option disclosure: The current debate. Corporate Ownership and Control 4:3, pages 87-95.
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Don M. Chance & Tung-Hsiao Yang. 2007. Issues in Corporate Governance and Finance. Issues in Corporate Governance and Finance 271 310 .
Jörg Engelbergs & Zacharias Sautner. (2006) Was kosten Aktienoptionsprogramme? Alternative Bewertungsansätze und Kosteneffekte bei Euro Stoxx 50-UnternehmenWhat are the costs of stock option programs? Alternative valuation approaches and cost effects for Euro Stoxx 50 companies. Journal of Business Economics 76:9, pages 903-931.
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Mukesh Bajaj, Sumon C. Mazumdar, Rahul Surana & Sanjay Unni. (2006) A Matrix-Based Lattice Model to Value Employee Stock Options. The Journal of Derivatives 14:1, pages 9-26.
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Manuel Ammann & Ralf Seiz. (2005) An IFRS 2 and FASB 123 (R) Compatible Model for the Valuation of Employee Stock Options. Financial Markets and Portfolio Management 19:4, pages 381-396.
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Jeremy BulowJohn B Shoven. (2005) Accounting for Stock Options. Journal of Economic Perspectives 19:4, pages 115-134.
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PHELIM BOYLE & WEIDONG TIAN. (2005) EXECUTIVE STOCK OPTIONS: A FIRM VALUE APPROACH. Journal of Derivatives Accounting 02:02, pages 189-201.
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DON M. CHANCE & TUNG-HSIAO YANG. (2005) THE UTILITY-BASED VALUATION AND COST OF EXECUTIVE STOCK OPTIONS IN A BINOMIAL FRAMEWORK: ISSUES AND METHODOLOGIES. Journal of Derivatives Accounting 02:02, pages 165-188.
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J. Carr Bettis, John M. Bizjak & Michael L. Lemmon. (2005) Exercise behavior, valuation, and the incentive effects of employee stock options. Journal of Financial Economics 76:2, pages 445-470.
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FENG LI & M. H. FRANCO WONG. (2005) Employee Stock Options, Equity Valuation, and the Valuation of Option Grants Using a Warrant-Pricing Model. Journal of Accounting Research 43:1, pages 97-131.
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Angel Leon & Antoni Vaello-Sebastià. (2007) Valuing Employee Stock Options Through Simulations. SSRN Electronic Journal.
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Sumon C. Mazumdar, Vikram K. Nanda & Rahul Surana. (2007) Using Auctions to Price Employee Stock Options: The Case of Zions Bancorporation ESOARS. SSRN Electronic Journal.
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Charles Chang, Cheng-der Fuh & Kate Hsu. (2006) ESO Compensation: The Roles of Default Risk and Over-Confidence. SSRN Electronic Journal.
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Jaksa Cvitanic, Fernando Zapatero & Zvi Wiener. (2006) Analytic Pricing of Employee Stock Options. SSRN Electronic Journal.
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Don M. Chance & Tung-Hsiao Yang. (2004) Expected Utility Valuation of Executive Stock Options in a Binomial Framework: A Comparative Analysis. SSRN Electronic Journal.
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M.H. Franco Wong & Feng Li. (2004) Employee Stock Options, Equity Valuation, and the Valuation of Option Grants using a Warrant-Pricing Model. SSRN Electronic Journal.
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Jeremy Bulow & John B. Shoven. (2005) Accounting for Stock Options. SSRN Electronic Journal.
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K. Ronnie Sircar & Wei Xiong. (2003) A General Framework for Evaluating Executive Stock Options. SSRN Electronic Journal.
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Chiu-Ming Hsiao. (2022) Is there a Dilution Effect of the Equity Incentive Plan. SSRN Electronic Journal.
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Tim Leung & Yang Zhou. (2019) A Top-Down Approach for the Multiple Exercises and Valuation of Employee Stock Options. SSRN Electronic Journal.
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Brian Byrne, Qianru Shang & Yinqiu Zhang. (2018) Accounting for Employee Stock Options: Accelerating Convergence. SSRN Electronic Journal.
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Vanessa CCmara de medeiros & Marcelo Ermel. (2017) Plano De Remuneraaao Baseado EM AAAes: Uma Annlise Dos Determinantes Da Sua Adoooo Nas Empresas Listadas Na BM&FBOVESPA (Stock Options Plans: An Analysis of the Determinants of Its Adoption in the Companies Listed on BM&FBOVESPA). SSRN Electronic Journal.
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Looc Belze, Francois Larmande & Lorenz Schneider. (2015) Pricing Model Management: Evidence from Employee Stock Option (Un)Fair Valuation. SSRN Electronic Journal.
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Hamza Bahaji & Jean-Francois Casta. (2013) Employee Stock Option-Implied Risk Attitude Under Rank-Dependent Expected Utility. SSRN Electronic Journal.
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David B. Colwell, David Feldman & Wei Hu. (2014) Non-Transferable Non-Hedgeable Executive Stock Options Pricing. SSRN Electronic Journal.
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Vasiliki E. Athanasakou, Daniel Ferreira & Lisa Goh. (2013) Corporate Investment and Changes in CEO Stock Option Grants. SSRN Electronic Journal.
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Tim S. T. Leung & Haohua Wan. (2013) Employee Stock Option Valuation under Levy Models. SSRN Electronic Journal.
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Patrick Bolton & Frederic Samama. (2012) L-Shares: Rewarding Long-Term Investors. SSRN Electronic Journal.
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Hamza Bahaji. (2011) Cumulative Prospect Theory, Employee Exercise Behaviour and Stock Options Cost Assessment. SSRN Electronic Journal.
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Menachem (Meni) Abudy & Simon Benninga. (2011) Nonmarketability and the Value of Employee Stock Options. SSRN Electronic Journal.
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Dwight Steward. (2010) Executive Stock-Based Compensation: A Case Study in Valuing Employee Stock Options and Restricted Stock Issues in a Breach of Contract Case. SSRN Electronic Journal.
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Andrew Ang & Nicolas P. B. Bollen. (2009) Locked Up by a Lockup: Valuing Liquidity as a Real Option. SSRN Electronic Journal.
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Andrew Ang & Nicolas P. B. Bollen. (2008) Locked Up by a Lockup: Valuing Liquidity as a Real Option. SSRN Electronic Journal.
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Tim Leung. (2010) Employee Stock Options: Accounting for Optimal Hedging, Suboptimal Exercises, and Contractual Restrictions. SSRN Electronic Journal.
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Cecil Duncan MacRae. (2008) The Employee Stock Option: An Installment Option. SSRN Electronic Journal.
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Olaf Korn, Clemens Paschke & Marliese Uhrig-Homburg. (2008) Desgning Robust Stock Option Plans. SSRN Electronic Journal.
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Olaf Korn, Marliese Uhrig-Homburg & Clemens Paschke. (2008) Designing Robust Stock Option Plans. SSRN Electronic Journal.
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Jennifer N. Carpenter, Richard H. Stanton & Nancy E. Wallace. (2008) Optimal Exercise of Executive Stock Options and Implications for Firm Cost. SSRN Electronic Journal.
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Graeme West. (2009) A Finite Difference Model for Valuation of Employee Stock Options. SSRN Electronic Journal.
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