Does Option Compensation Increase Managerial Risk Appetite ?  

Oleh:

Carpenter, Jennifer N.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 55 no. 5 (2000), page 2311-2332.
Topik: compensation; studies; investment policy; risk aversion; put & call options; compensation
Fulltext: p 2311.pdf (144.78KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88.3 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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This paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls. Under the manager's optimal policy, the option ends up either deep in or deep out of the money. As the asset value goes to zero, volatility goes to infinity. However, the option compensation does not strictly lead to greater risk seeking. Sometimes, the manager's optimal volatility is less with the option than it would be if he were trading his own account. Furthermore, giving the manager more options causes him to reduce volatility.

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