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Risk, Ambiguity, and the Exercise of Employee Stock Options
National Bureau of Economic Research [NBER] Link to more items from this source
Mar. 17, 2014
"[The authors] investigate the importance of ambiguity, or Knightian uncertainty, in executives' decisions about when to exercise stock options. [They] develop an empirical estimate of ambiguity and include it in regression models alongside the more traditional measure of risk, equity volatility.... [E]ach variable has a statistically significant effect on the timing of option exercises, with volatility causing executives to hold their options longer in order to preserve remaining option value, and ambiguity increasing the tendency for executives to exercise early in response to risk aversion."

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