Do stock options improve employee performance?

It has become an article of faith in Silicon Valley that stock options create incentives for employees to work harder and smarter. But does that assumption stand up? It depends on who is receiving the options, according to ...

New theory on fairness in economics targets CEO pay

(PhysOrg.com) -- Chief executives in 35 of the top Fortune 500 companies were overpaid by about 129 times their "ideal salaries" in 2008, according to a new type of theoretical analysis proposed by a Purdue University researcher ...

Yahoo's Yang gets $1 in rocky final year as CEO

(AP) -- Yahoo Inc. limited co-founder Jerry Yang's 2008 compensation package to his customary $1 salary during his final year as chief executive, a tumultuous reign that unraveled after he rebuffed Microsoft Corp.'s $47.5 ...

Intel CEO gets $12.4M in 2008 pay

(AP) -- The value of Intel Corp. Chief Executive Paul Otellini's compensation package rose slightly to $12.4 million in 2008, a year in which the chip maker's profit was whacked by a global slowdown in personal computer ...

Rideshare drivers strike as Uber poised to go public

Thousands of Uber and Lyft drivers turned off their apps in a US-wide strike Wednesday over pay and working conditions, casting a shadow over this week's keenly anticipated Wall Street debut of ride-hailing leader Uber.

Uber pulls back on valuation with IPO pricing

Uber pulled back on its ambitious valuation target Friday for its Wall Street debut, while still pricing its share offering in a range that would make it one of the largest in recent years in the tech sector.

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Option (finance)

In finance, an option is a contract between a buyer and a seller that gives the buyer the right—but not the obligation—to buy or to sell a particular asset (the underlying asset) at a later day at an agreed price. In return for granting the option, the seller collects a payment (the premium) from the buyer. A call option gives the buyer the right to buy the underlying asset; a put option gives the buyer of the option the right to sell the underlying asset. If the buyer chooses to exercise this right, the seller is obliged to sell or buy the asset at the agreed price. The buyer may choose not to exercise the right and let it expire. The underlying asset can be a piece of property, or shares of stock or some other security, such as, among others, a futures contract. For example, buying a call option provides the right to buy a specified quantity of a security at a set agreed amount, known as the 'strike price' at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote the option, must fulfill the terms of the contract.

The theoretical value of an option can be evaluated according to several models. These models, which are developed by quantitative analysts, attempt to predict how the value of the option will change in response to changing conditions. Hence, the risks associated with granting, owning, or trading options may be quantified and managed with a greater degree of precision, perhaps, than with some other investments. Exchange-traded options form an important class of options which have standardized contract features and trade on public exchanges, facilitating trading among independent parties. Over-the-counter options are traded between private parties, often well-capitalized institutions that have negotiated separate trading and clearing arrangements with each other. Another important class of options, particularly in the U.S., are employee stock options, which are awarded by a company to their employees as a form of incentive compensation. Other types of options exist in many financial contracts, for example real estate options are often used to assemble large parcels of land, and prepayment options are usually included in mortgage loans. However, many of the valuation and risk management principles apply across all financial options.

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