Option Values and Endogenous Uncertainty in ESOPs, MBOs and Asset Backed Securities
10 Pages Posted: 4 Feb 2010
Date Written: 1995
Abstract
We consider contracts to purchase assets by means of streams of payments over time, with the asset as security. These give the purchaser an option not present if all payment is made up front, the option of stopping payments and delivering the asset in satisfaction of the remaining debt. We argue that the value inherent in such options explains the attractions of asset-backed leans, employee stock options plans and MBOs.
Keywords: Option values, Endogenous uncertainty, Employee stock option plan
JEL Classification: G12
Suggested Citation: Suggested Citation
Chichilnisky, Graciela and Heal, Geoffrey M. and Tsomocos, Dimitrios P., Option Values and Endogenous Uncertainty in ESOPs, MBOs and Asset Backed Securities (1995). Available at SSRN: https://ssrn.com/abstract=1522310 or http://dx.doi.org/10.2139/ssrn.1522310
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