E3S Web Conf.
Volume 328, 2021International Conference on Science and Technology (ICST 2021)
|Number of page(s)||4|
|Section||Mathematic Model, Learning Modelep, Epidemic Model|
|Published online||06 December 2021|
Binomial Approach for The Valuation of Employee Stock Option with some features: Vesting Period, Exit Rate, Reload, and Reset
Mathematics Department, Universitas Negeri Surabaya, Indonesia
* Corresponding author : firstname.lastname@example.org
An Employee stock option (ESO) is one of compensation that given by company to their employee. It gives right to the employee to buy companies stock in the future with special price that have been agreed when the options were granted. In general, the valuation of ESO pricing is different with other option pricing. ESO have some features which accommodate company importance and also consider employee behavior. This article aimed to apply the binomial approach for the valuation of ESO by considering some features such as a).Vesting period, which is waiting time to exercise the option, b). Exit rate, which is feature that consider employments shock, c). Reload, a feature that give a new option after the old one had been exercised, d). Reset, a feature that doing reset on the agreement in ESO if stock in “out of money” condition. The valuation of the ESO price have been derived from the five possibility of payoff with consideration of each features involved. This study gave the valuation of ESO which consists of two areas, namely the ESO price after vesting period and ESO price at vesting period.
Key words: Employee stock option / binomial approach / vesting period
© The Authors, published by EDP Sciences, 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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