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Employee Stock Option
Employee stock options (ESO) is a label that refers to compensation contracts between an employer and an employee that carries some characteristics of financial options. Employee stock options are commonly viewed as an internal agreement providing the possibility to participate in the share capital of a company, granted by the company to an employee as part of the employee's remuneration package. Regulators and economists have since specified that ESOs are compensation contracts. These nonstandard contracts exist between employee and employer, whereby the employer has the liability of delivering a certain number of shares of the employer stock, when and if the employee stock options are exercised by the employee. The contract length varies, and often carries terms that may change depending on the employer and the current employment status of the employee. In the United States, the terms are detailed within an employer's "Stock Option Agreement for Incentive Equity Plan". Es ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Options (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in ''over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Incentive Stock Option
Incentive stock options (ISOs), are a type of employee stock option that can be granted only to employees and confer a U.S. tax benefit. ISOs are also sometimes referred to as statutory stock options by the IRS. ISOs have a strike price, which is the price a holder must pay to purchase one share of the stock. ISOs may be issued both by public companies and private companies, with ISOs being common as a form of executive compensation for public companies, and common as a form of equity compensation in private start-up companies. The tax benefit is that on exercise, the individual does not pay ordinary income tax nor employment taxes on the difference between the exercise price and the strike price of the shares issued (but may owe a substantial alternative minimum tax if the shares are not sold in the same year, especially if the difference between exercise price and strike price is large, on the order of $50,000 or more). Rather, if the shares are held for 1 year from the date of e ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option Style
In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options—as well as others where the payoff is calculated similarly—are referred to as "vanilla options". Options where the payoff is calculated differently are categorized as "exotic options". Exotic options can pose challenging problems in valuation and hedging. American and European options The key difference between American and European options relates to when the options can be exercised: * A European option may be exercised only at the expiration date of the option, i.e. at a single pre-defined point in time. * An American option on the other hand may be exercised at any time before the expiration date. For both, the payoff—when it occurs—is given by * \max\, for a call option * \max\, for a put option where K is the strike pr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
European Option
In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options—as well as others where the payoff is calculated similarly—are referred to as "vanilla options". Options where the payoff is calculated differently are categorized as "exotic options". Exotic options can pose challenging problems in valuation and hedging. American and European options The key difference between American and European options relates to when the options can be exercised: * A European option may be exercised only at the expiration date of the option, i.e. at a single pre-defined point in time. * An American option on the other hand may be exercised at any time before the expiration date. For both, the payoff—when it occurs—is given by * \max\, for a call option * \max\, for a put option where K is the strike pr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
KPMG
KPMG International Limited (or simply KPMG) is a multinational professional services network, and one of the Big Four accounting organizations. Headquartered in Amstelveen, Netherlands, although incorporated in London, England, KPMG is a network of firms in 145 countries, with over 265,000 employees and has three lines of services: financial audit, tax, and advisory. Its tax and advisory services are further divided into various service groups. Over the past decade various parts of the firm's global network of affiliates have been involved in regulatory actions as well as lawsuits. The name "KPMG" stands for "Klynveld Peat Marwick Goerdeler". The initialism was chosen when KMG (Klynveld Main Goerdeler) merged with Peat Marwick in 1987. History Early years and mergers In 1818, John Moxham opened a company in Bristol. James Grace and James Grace Jr. bought John Moxham & Co. and renamed it James Grace & Son in 1857. In 1861, Henry Grace joined James Jr. and t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in ''over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Exercise (options)
The owner of an option contract has the right to exercise it, and thus require that the financial transaction specified by the contract is to be carried out immediately between the two parties, whereupon the option contract is terminated. When exercising a call option, the owner of the option purchases the underlying shares (or commodities, fixed interest securities, etc.) at the strike price from the option seller, while for a put option, the owner of the option sells the underlying to the option seller, again at the strike price. Styles The option style, as specified in the contract, determines when, how, and under what circumstances, the option holder may exercise it. It is at the discretion of the owner whether (and in some circumstances when) to exercise it. * European – European-style option contracts may only be exercised at the option's expiration date. Thus they can never be worth more than an American-style option with the same underlying strike price and expiration d ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Volatility (finance)
In finance, volatility (usually denoted by ''σ'') is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Volatility terminology Volatility as described here refers to the actual volatility, more specifically: * actual current volatility of a financial instrument for a specified period (for example 30 days or 90 days), based on historical prices over the specified period with the last observation the most recent price. * actual historical volatility which refers to the volatility of a financial instrument over a specified period but with the last observation on a date in the past **near synonymous is realized volatility, the square root of the realized variance, in turn calculated using the sum of squ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Lattice Model (finance)
In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is required at "all" times (any time) before and including maturity. A continuous model, on the other hand, such as Black–Scholes, would only allow for the valuation of European options, where exercise is on the option's maturity date. For interest rate derivatives lattices are additionally useful in that they address many of the issues encountered with continuous models, such as pull to par. The method is also used for valuing certain exotic options, where because of path dependence in the payoff, Monte Carlo methods for option pricing fail to account for optimal decisions to terminate the derivative by early exercise, though methods now exist for solving this problem. Equity and commodity derivatives In general the approach is to divid ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Black–Scholes Model
The Black–Scholes or Black–Scholes–Merton model is a mathematical model for the dynamics of a financial market containing derivative investment instruments. From the parabolic partial differential equation in the model, known as the Black–Scholes equation, one can deduce the Black–Scholes formula, which gives a theoretical estimate of the price of European-style options and shows that the option has a ''unique'' price given the risk of the security and its expected return (instead replacing the security's expected return with the risk-neutral rate). The equation and model are named after economists Fischer Black and Myron Scholes; Robert C. Merton, who first wrote an academic paper on the subject, is sometimes also credited. The main principle behind the model is to hedge the option by buying and selling the underlying asset in a specific way to eliminate risk. This type of hedging is called "continuously revised delta hedging" and is the basis of more complicated ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Contract Differences
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to transfer any of those at a future date. In the event of a breach of contract, the injured party may seek judicial remedies such as damages or rescission. Contract law, the field of the law of obligations concerned with contracts, is based on the principle that agreements must be honoured. Contract law, like other areas of private law, varies between jurisdictions. The various systems of contract law can broadly be split between common law jurisdictions, civil law jurisdictions, and mixed law jurisdictions which combine elements of both common and civil law. Common law jurisdictions typically require contracts to include consideration in order to be valid, whereas civil and most mixed law jurisdictions solely require a meeting of the mind ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Valuation Of Options
In finance, a price (premium) is paid or received for purchasing or selling options. This article discusses the calculation of this premium in general. For further detail, see: for discussion of the mathematics; Financial engineering for the implementation; as well as generally. Premium components This price can be split into two components: intrinsic value, and time value. Intrinsic value The ''intrinsic value'' is the difference between the underlying spot price and the strike price, to the extent that this is in favor of the option holder. For a call option, the option is in-the-money if the underlying spot price is higher than the strike price; then the intrinsic value is the underlying price minus the strike price. For a put option, the option is in-the-money if the ''strike'' price is higher than the underlying spot price; then the intrinsic value is the strike price minus the underlying spot price. Otherwise the intrinsic value is zero. For example, when a DJI call (bu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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