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We propose a continuous time utility maximization model to value stock and option compensation from the executive's perspective. We allow the executive to invest non-option wealth in the market and riskless asset but not in the company stock itself. This enables executives to adjust exposure to market risk, but they are subject to firm-specific risk for(More)
Patients with life-threatening conditions sometimes appear to make risky treatment decisions as their condition declines, contradicting the risk-averse behavior predicted by expected utility theory. Prospect theory accommodates such decisions by describing how individuals evaluate outcomes relative to a reference point and how they exhibit risk-seeking(More)
  • James Robert Melnick, James Colin Montupet, Emma Rasiel, Lori Leachman
  • 2009
Acknowledgements We would like to thank Dr. Emma Rasiel for invaluable advice on everything from financial theory to proper academic writing; this research would not have been possible without her consistent and patient help. In addition, we would like to thank Dr. Lori Leachman for her input on econometric techniques and macroeconomic concerns. Finally, we(More)
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