This paper evaluates the underperformance of individual equity options relative to their replicating portfolios. Considering a high-dimensional set of variables, we use a machine learning approach to identify the characteristics of options and their underlying stocks that provide incremental...

This paper examines the issues and controversies over the question of whether executive stock options should be expensed and, if so, how option values should be determined. It identifies and clarifies the key questions and surveys and synthesizes the academic and trade literature. Illustrations...

Options are among the most important forms of compensation and incentive structuring. Standard option pricing theory provides guidelines but not a conclusive prescription of how to value executive stock options. Academic research on this subject has gone in several related but distinct...

A swaption is a derivative contract granting the right to enter into a swap. The literature on swaptions is sparse, and only the interest rate swaption has been examined. This paper examines swaptions on equities, currencies, and commodities, exploring a variety of constructions to determine how...

Pricing compound and min-max options requires the estimation of the bivariate normal probability. Using the slower Simpson numerical integration as the accuracy benchmark, four alternative bivariate normal probability estimation methods are compared in terms of accuracy and speed in pricing...

Properly designed incentives should reward management if and only if it succeeds in increasing shareholder wealth. We show that conventional at-the-money stock options do not achieve this objective, because they allow management to benefit from value created before the options were awarded....

This paper uses data on current volume and contracts approved by the Commodity Futures Trading Commission to document the history of approvals, launches, and successes of all contracts in U. S. futures and futures options markets. Over 1,100 futures and options contracts have been approved and...