Analytic pricing of employee stock options

Jakša Cvitanić, Zvi Wiener*, Fernando Zapatero

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

37 Scopus citations


We introduce a model that captures the main properties that characterize employee stock options (ESO). We discuss the likelihood of early voluntary ESO exercise, and the obligation to exercise immediately if the employee leaves the firm, except if this happens before options are vested, in which case the options are forfeited. We derive an analytic formula for the price of the ESO and in a case study compare it to alternative methods.

Original languageAmerican English
Pages (from-to)683-724
Number of pages42
JournalReview of Financial Studies
Issue number2
StatePublished - Apr 2008


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