The Volatility and Price Sensitivities of Managerial Stock Option Portfolios and Corporate Hedging

Posted: 28 Dec 2003

See all articles by John D. Knopf

John D. Knopf

University of Connecticut - Department of Finance

Jouahn Nam

Pace University - Lubin School of Business

John Harris Thornton

Kent State University

Abstract

We use estimates of the Black-Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of managers' stock and stock option portfolios to stock price to test the relationship between managers' risk preferences and hedging activities. We find that as the sensitivity of managers' stock and stock option portfolios to stock price increases, firms tend to hedge more. However, as the sensitivity of managers' stock option portfolios to stock return volatility increases, firms tend to hedge less.

Suggested Citation

Knopf, John D. and Nam, Jouahn and Thornton, John Harris, The Volatility and Price Sensitivities of Managerial Stock Option Portfolios and Corporate Hedging. Journal of Finance, Vol. 57, pp. 801-813, 2002. Available at SSRN: https://ssrn.com/abstract=309181

John D. Knopf (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

Jouahn Nam

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212-346-1818 (Phone)
212-346-1573 (Fax)

John Harris Thornton

Kent State University ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States
330-672-1214 (Phone)
330-672-9806 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
807
PlumX Metrics