American GARCH employee stock option valuation

作者：Leon Angel^*; Vaello Sebastia Antoni

来源：Journal of Banking & Finance, 2009, 33(6): 1129-1143.

DOI：10.1016/j.jbankfin.2008.12.012

• Employee stock option
• GARCH
• Least-squares Monte Carlo
• Fair value

We implement a flexible simulation-based approach for the fair value of employee stock option (ESO) that accounts for the vesting period, departure risk and voluntary suboptimal early exercise. We introduce GARCH effects on the underlying asset and we analyze,the price bias with respect to the constant volatility case. We also perform a sensitivity analysis with respect to changes in several ESO characteristics. We compare this Valuation with FAS 123 method revealing a FAS overvaluation. Finally, we value a real ESO plan providing the confidence intervals for the estimated ESO prices.

• 出版日期2009-6