Managerial responses to incentives : control of firm risk, derivative pricing implications, and outside wealth management

Hodder, James E.; Jackwerth, Jens

Managerial responses to incentives : control of firm risk, derivative pricing implications, and outside wealth management

Dateien

Hodder_190986.pdfGröße: 2.25 MBDownloads: 347

Datum

2011

Autor:innen

Hodder, James E.

Jackwerth, Jens

Open Access-Veröffentlichung

Open Access Green

Sammlungen

Wirtschaftswissenschaften

Publikationstyp

Zeitschriftenartikel

Publikationsstatus

Published

Erschienen in

Journal of Banking & Finance. 2011, 35(6), pp. 1507-1518. ISSN 0378-4266. eISSN 1872-6372. Available under: doi: 10.1016/j.jbankfin.2010.10.032

Zusammenfassung

We model a firm’s value process controlled by a manager maximizing expected utility from restricted shares and employee stock options. The manager also controls allocation of his outside wealth, which allows partially hedging of his exposure to firm risk. Managerial control increases the expected time to exercise for his employee stock options. It also reduces the gap between his certainty equivalent and the firm’s Fair Value for his compensation, but that gap remains substantial. Managerial control also causes traded options to exhibit an implied volatility smile. With costly control the same basic patterns remain, but the manager’s risk-taking is dampened.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

Optimal risk-taking, managerial control, derivatives

Zitieren

ISO 690

HODDER, James E., Jens JACKWERTH, 2011. Managerial responses to incentives : control of firm risk, derivative pricing implications, and outside wealth management. In: Journal of Banking & Finance. 2011, 35(6), pp. 1507-1518. ISSN 0378-4266. eISSN 1872-6372. Available under: doi: 10.1016/j.jbankfin.2010.10.032

BibTex

@article{Hodder2011Manag-19098,
  year={2011},
  doi={10.1016/j.jbankfin.2010.10.032},
  title={Managerial responses to incentives : control of firm risk, derivative pricing implications, and outside wealth management},
  number={6},
  volume={35},
  issn={0378-4266},
  journal={Journal of Banking & Finance},
  pages={1507--1518},
  author={Hodder, James E. and Jackwerth, Jens}
}

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Universitätsbibliographie

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