期权期货及其衍生品第15弹.ppt

Chapter 15Employee Stock Options,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,1,Nature of Employee Stock Options,Employee stock options are call options issued by a company on its own stockThey are often at-the-money at the time of issueThey often last as long as 10 years,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,2,Typical Features of Employee Stock Options(page 333),There is a vesting period during which options cannot be exercisedWhen employees leave during the vesting period options are forfeitedWhen employees leave after the vesting period in-the-money options are exercised immediately and out of the money options are forfeitedEmployees are not permitted to sell optionsWhen options are exercised the company issues new shares,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,3,Exercise Decision,To realize cash from an employee stock option the employee must exercise the options and sell the underlying sharesEven when the underlying stock pays no dividend an employee stock option(unlike a regular call option)is often exercised early,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,4,Drawbacks of Employee Stock Options,Gain to executives from good performance is much greater than the penalty for bad performanceExecutives do very well when the stock market as a whole goes up,even if their firm does relatively poorlyExecutives are encouraged to focus on short-term performance at the expense of long-term performanceExecutives are tempted to time announcements or take other decisions that maximize the value of the options,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,5,Accounting for Employee Stock Options,Prior to 1995 the cost of an employee stock option on the income statement was its intrinsic value on the issue dateAfter 1995 a“fair value”had to be reported in the notes(but expensing fair value on the income statement was optional)Since 2005 both FASB and IASB have required the fair value of options to be charged against income at the time of issue,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,6,Traditional At-the-Money Call Options,The attraction of at-the-money call options used to be that they led to no expense on the income statement because they had zero intrinsic value on the exercise dateOther plans were liable to lead an expenseNow that the accounting rules have changed some companies are considering other types of plans,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,7,Nontraditional Plans page 336,Strike price is linked to stock index so that the companys stock price has to outperform the index for options to move in the moneyStrike price increases in a predetermined wayOptions vest only if specified profit targets are met,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,8,Valuation of Employee Stock Options,Most common approach is to use Black-Scholes-Merton with time to maturity equal to an estimate of expected life There is no theoretical justification for this but it seems to give reasonable results in most circumstances,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,9,Example(Example 15.1,page 337),A company issues one million10-year ATM optionsstock price is$30.It estimates the long term volatility using historical data to be 25%and the average time to exercise to be 4.5 yearsThe 4.5 year interest rate is 5%and dividends during the next 4.5 years are estimated to have a PV of$4Using BSM with S0=30,K=30,r=5%,s=25%,and T=4.5 years gives value of each option equal to$6.31The income statement expense would be$6.31 million,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,10,Other Approaches,Estimate the probability of exercise as a function of the stock price and remaining life.Use a binomial tree with roll back rules reflecting the probabilitiesA simple version of this is to assume that the option is exercised when the ratio of the stock price to the strike price reaches some multipleUse an auction to determine the market prices of securities whose payoffs mirror the payoffs from the optionsThis is an approach used by Zions Bancorp in 2007,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,11,Dilution,Employee stock options are liable to dilute the interests of shareholders because new shares are bought at below market priceHowever this dilution takes place at the time the market hears that the options have been granted(Business Snapshot 14.3)It does not take place at the time the options are exercised,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,12,Backdating,Backdating appears to have been a widespread practice in the United StatesA company might take the decision to issue at-the-money options on April 30 when the stock price is$50 and then backdate the grant date to April 3 when the stock price is$42Why would they do this?,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,13,Academic Research Exposed Backdating,Options,Futures,and Other Derivatives,8th Edition,Copyright John C.Hull 2012,14,