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Recover the Missing Dimension of Managerial Risk of Stockholdings and Option Grants

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  • Nie, George Y.

    (Concordia University)

Abstract

Nie (2023) suggests that Markowitz (1952) asset risk misses the indispensable dimension of time length of asset holder’s risk, thereby preventing scholars from measuring managerial risk of stockholdings and option grants bound with untradability. This study captures managerial risk as the risk over the (in)visible time lengths of untradability of the underlying assets and their outcomes until they turn fully tradable. Nie (2023) argues that asset risk causes volatility, but not vice versa, implying that Black and Scholes (1973) effectively price options as risk-free. Our option value includes the underlying stock and a deferred payment weighted on their probabilities at maturity.

Suggested Citation

  • Nie, George Y., 2023. "Recover the Missing Dimension of Managerial Risk of Stockholdings and Option Grants," SocArXiv rcj8t_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:rcj8t_v1
    DOI: 10.31219/osf.io/rcj8t_v1
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