Title: On the Valuation of Warrants and Executive Stock Options: Pricing Formulae for Firms with Multiple Warrants/Executive Options
Abstract: their superficial similarity, warrants and executive options differ in a number of important ways from vanilla exchange traded options. These differences, initially between warrants and standard call options and in the very recent years between executive stock options (ESOs) and exchange traded options, have inspired a great deal of academic and practical interest that has spanned the subject not only from a purely “asset pricing/valuation” perspective or from a purely “corporate finance/agency theory” perspective but has also resulted in an amalgamation of the two in the sense that valuation of warrants and ESOs has occasionally not been free of considerations such as corporate policies, managerial incentives, stockholders attitudes etc. Furthermore, as interest and more importantly issuance of these corporate instruments, particularly ESOs, has surged over the years, and all this amidst widespread demand for more financial transparency in corporate accounts, assessing correctly their true cost/value to stockholders/stakeholders has never been more imperative. We first briefly outline a few, from a long list of features, that distinguish warrants and ESOs from standard exchange traded options and can potentially complicate
Publication Year: 2002
Publication Date: 2002-07-01
Language: en
Type: preprint
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Cited By Count: 7
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