TY  - JOUR
AU  - Huddart,Steven
AU  - Jagannathan,Ravi
AU  - Saly,Jane
TI  - Valuing the Reload Features of Executive Stock Options
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7020
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7020
L1  - http://www.nber.org/papers/w7020.pdf
N1  - Author contact info:
Ravi Jagannathan
Kellogg Graduate School of Management
Northwestern University
2001 Sheridan Road
Leverone/Anderson Complex
Evanston, IL 60208-2001
Tel: 847/491-8338
Fax: 847/491-5719
E-Mail: rjaganna@northwestern.edu
AB  - Under Statement of Financial Accounting Standards No. 123, the grant date value of executive stock options excludes the value of any reload feature because, at the time of writing the standard in 1995, the Financial Accounting Standards Board believed it was not feasible to value a reload feature at the grant date.  We show how the Binomial Option Pricing Model can be used to determine the grant date value of such options.  Ignoring the reload feature can substantially understate the value of the option: the reload feature increases the value of an otherwise similar option by 24 percent in the example we consider.  In view of the potential significance of the reload feature and the versatility of the Binomial Option Pricing Model, the Financial Accounting Standards Board may wish to reconsider the accounting for options with a reload feature.
ER  -