Probability weighting is one of the cornerstones of decision-making theories accommodating gambling preferences. This paper examines its relevance to explaining employee stock option exercise behavior. We characterized the optimal exercise policy for a representative employee with Rank-Dependent...

This research provides an alternative framework for the analysis of employee stock option exercise 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...

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...