• xmlui.mirage2.page-structure.header.title
    • français
    • English
  • Help
  • Login
  • Language 
    • Français
    • English
View Item 
  •   BIRD Home
  • DRM (UMR CNRS 7088)
  • DRM : Publications
  • View Item
  •   BIRD Home
  • DRM (UMR CNRS 7088)
  • DRM : Publications
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Browse

BIRDResearch centres & CollectionsBy Issue DateAuthorsTitlesTypeThis CollectionBy Issue DateAuthorsTitlesType

My Account

LoginRegister

Statistics

Most Popular ItemsStatistics by CountryMost Popular Authors
Thumbnail

Cumulative Prospect Theory, employee exercise behaviour and stock options cost assessment

Bahaji, Hamza (2011-12), Cumulative Prospect Theory, employee exercise behaviour and stock options cost assessment, 29th Spring International Conference of the French Finance Association, 2012-05, Strasbourg, France

View/Open
54_BAHAJI.pdf (458.7Kb)
Type
Communication / Conférence
Date
2011-12
Conference title
29th Spring International Conference of the French Finance Association
Conference date
2012-05
Conference city
Strasbourg
Conference country
France
Pages
50
Metadata
Show full item record
Author(s)
Bahaji, Hamza
Abstract (EN)
This research provides an alternative framework for the valuation of standard employee stock options and for the analysis of exercise behavior patterns. It develops a binomial model where the exercise decision obeys to a policy that maximizes the expected utility to a representative employee exhibiting preferences as described by the Cumulative Prospect Theory (CPT). This model also accounts for exogenous non-market factors that may cause early exercise. Using a large database on stock options exercise transactions in 12 US public corporations, we examined the performance of our model in predicting actual exercise patterns. Interestingly, the model calibrations yield probability weighting coefficient estimates that are consistent with the estimates from the experimental literature. Further, our results suggest that the CPT-based model outperforms the Expected Utility Theory-based model in predicting actual exercise patterns in our sample. These findings convey the main contribution of this paper which is the strong ability of the CPT framework to explain the employees exercise behavior. It therefore provides rationale for using this framework in order to get more accurate fair value estimates of employee stock options contracts.
Subjects / Keywords
Stock-options; Exercise behavior; Cumulative Prospect Theory; Fair value; Option valuation
JEL
G13 - Contingent Pricing; Futures Pricing
G30 - General
J33 - Compensation Packages; Payment Methods
M41 - Accounting

Related items

Showing items related by title and author.

  • Thumbnail
    Are Employee Stock Option Exercise Decisions Better Explained through the Prospect Theory? 
    Bahaji, Hamza (2014-03) Communication / Conférence
  • Thumbnail
    De l’évaluation des stock options en « juste valeur » : apport de l’approche comportementale 
    Bahaji, Hamza (2012-10) Thèse
  • Thumbnail
    Employee stock option-implied risk attitude under Rank-Dependent Expected Utility 
    Bahaji, Hamza; Casta, Jean-François (2016) Article accepté pour publication ou publié
  • Thumbnail
    Employee Stock Options Incentive Effects: A CPT-Based Model 
    Bahaji, Hamza (2011) Communication / Conférence
  • Thumbnail
    Contribution à l'analyse des déterminants du comportement d'exercice des porteurs de stock options : une étude empirique sur le marché Américain 
    Bahaji, Hamza (2009) Document de travail / Working paper
Dauphine PSL Bibliothèque logo
Place du Maréchal de Lattre de Tassigny 75775 Paris Cedex 16
Phone: 01 44 05 40 94
Contact
Dauphine PSL logoEQUIS logoCreative Commons logo