UK Executive Stock Option Valuation: A Conditional Model
研究了英国高管股票期权作为美式期权的估值，考虑业绩条件概率，发现其价值比布莱克-斯科尔斯模型低17%，但激励水平更高，对LTIP替代和利润扣减有启示。
We value UK executive stock options (ESOs) as American options that are awarded conditional on the probability of the holders achieving some performance criteria. Unlike the standard Black and Scholes (BS) model, which is universally used both in the literature and practice, this provides a more realistic representation of UK ESOs. We show that UK ESOs actually have less value and contain more incentives than they appear under the BS approach. Specifically, we observe a 17 per cent average discount in the value of the ESOs when compared to their BS value. In addition, we find significantly higher incentive levels when we measure the sensitivity of the options using the hedge ratio, i.e. the option's delta. We argue that these findings have implications for two contemporary debates in the UK, i.e. the substitution of ESOs by Long‐Term Incentive Plans (LTIPs) and the discounting of ESO value from company profits.