Figlewski proposed testing the incremental contribution of the Black-Scholes model by comparing its performance against an “informationally passive” benchmark, which was defined to be an option pricing formula satisfying static no-arbitrage constraints. In this paper we extend Figlewski's...

This paper examines the effect on valuation and incentives of allowing executives receiving options to trade on the market portfolio. We propose a continuous time utility maximization model to value stock and option compensation from the executive's perspective. The executive may invest...

In this paper we investigate the possible values of basket options. Instead of postulating a model and pricing the basket option using that model, we consider the set of all models which are consistent with the observed prices of vanilla options, and, within this class, find the model for which...