OPT_EXEC

OPT_EXEC theoretical price of executive stock options

Synopsis

OPT_EXEC(call_put_flag,spot,strike,time,rate,volatility,cost_of_carry,lambda)

Arguments

call_put_flag: 'c' for a call and 'p' for a put

spot: spot price

strike: strike price

time: time to maturity in days

rate: annualized risk-free interest rate

volatility: annualized volatility of the asset

cost_of_carry: net cost of holding the underlying asset

lambda: jump rate for executives

Note

The model assumes executives forfeit their options if they leave the company.