Stock options may cost shareholders much less than previously thought

Con­tro­ver­sial stock options for com­pany exec­u­tives may be much less costly to share­hold­ers than cur­rent math­e­mat­i­cal mod­els sug­gest, accord­ing to research pre­sented Jan. 5 by Tim Leung of Princeton’s Depart­ment of Oper­a­tions Research and Finan­cial Engineering.

At the annual meet­ing of the Amer­i­can Math­e­mat­i­cal Soci­ety, Leung demon­strated that, in one sce­nario, stock options were worth about half of what they would be val­ued if one were to cal­cu­late their worth using a con­ven­tional method.

Leung and Ron­nie Sir­car, also of ORFE, sub­mit­ted a paper on this research to the jour­nal Social Sci­ence Research Net­work, where an abstract and a down­load­able copy of the paper can be found.

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