Full Text Available
Note: Clicking the button above will open the full text document at the original institutional repository in a new window.
Employee Stock Option Valuation with Earnings-Based Vesting Condition
The valuation of employee stock options has become a key requirement due to the rapid growth in the use of these options as a means of employee compensation. IFRS 2 Share-based Payment stipulates that these instruments must be valued and expensed on the date the awards are issued. This dissertation...
Saved in:
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Thesis |
| Language: | English |
| Published: |
African Institute of Financial Markets and Risk Management
2019
|
| Subjects: | |
| Tags: |
No Tags, Be the first to tag this record!
|
| _version_ | 1867613183778226176 |
|---|---|
| access_status_str | Open Access |
| author | Patel, Kavir |
| author2 | McWalter, Thomas |
| author_browse | McWalter, Thomas Patel, Kavir |
| author_facet | McWalter, Thomas Patel, Kavir |
| author_sort | Patel, Kavir |
| collection | Thesis |
| description | The valuation of employee stock options has become a key requirement due to the rapid growth in the use of these options as a means of employee compensation. IFRS 2 Share-based Payment stipulates that these instruments must be valued and expensed on the date the awards are issued. This dissertation aims to value an employee stock option, in a case where both the equity and vesting (performance) condition are based on a reported earnings process. The equity dependency on earnings stems from the fact that we are primarily concerned with the valuation of employee stock options that are issued by a private firm. We implement a capital structure framework provided by Goldstein, Ju and Leland (2001). In this framework, equity and debt are derived from an underlying EBIT process that is governed by a geometric Brownian motion. The model also accounts for taxation and bankruptcy. The research aim is addressed by incorporating the capital structure model into our employee stock option pricing framework. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/29471 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:06.010Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2019 |
| publishDateRange | 2019 |
| publishDateSort | 2019 |
| publisher | African Institute of Financial Markets and Risk Management |
| publisherStr | African Institute of Financial Markets and Risk Management |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/29471 Employee Stock Option Valuation with Earnings-Based Vesting Condition Patel, Kavir McWalter, Thomas Musvosv, Chiedza Mathematical Finance The valuation of employee stock options has become a key requirement due to the rapid growth in the use of these options as a means of employee compensation. IFRS 2 Share-based Payment stipulates that these instruments must be valued and expensed on the date the awards are issued. This dissertation aims to value an employee stock option, in a case where both the equity and vesting (performance) condition are based on a reported earnings process. The equity dependency on earnings stems from the fact that we are primarily concerned with the valuation of employee stock options that are issued by a private firm. We implement a capital structure framework provided by Goldstein, Ju and Leland (2001). In this framework, equity and debt are derived from an underlying EBIT process that is governed by a geometric Brownian motion. The model also accounts for taxation and bankruptcy. The research aim is addressed by incorporating the capital structure model into our employee stock option pricing framework. 2019-02-11T13:18:16Z 2019-02-11T13:18:16Z 2018 2019-02-11T11:05:25Z Master Thesis Masters MPhil http://hdl.handle.net/11427/29471 eng application/pdf African Institute of Financial Markets and Risk Management Faculty of Commerce University of Cape Town |
| spellingShingle | Mathematical Finance Patel, Kavir Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| thesis_degree_str | Master's |
| title | Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| title_full | Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| title_fullStr | Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| title_full_unstemmed | Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| title_short | Employee Stock Option Valuation with Earnings-Based Vesting Condition |
| title_sort | employee stock option valuation with earnings based vesting condition |
| topic | Mathematical Finance |
| url | http://hdl.handle.net/11427/29471 |
| work_keys_str_mv | AT patelkavir employeestockoptionvaluationwithearningsbasedvestingcondition |