17. There have been many instances where US companies have "backdated" their employee option grants to especially favorable dates, namely dates when the stock price was low so as to set low strikes on their issued call options relative to current prices. What exotic option does this practice resemble? Are there any differences between this exotic option and the backdated option grant?
Remark Executivestockoptions in the US (as in most of the world) are typically granted at-the-money. "Backdating" refers to a practice, alleged to have been present at many US companies until at least the the mid-2000s, in which companies that were granting executives stock options looked back at their own stock prices over a given period (e.g., a year), and chose a low point over that period as the ostensible date of grant. This ensures the grantee a low strike price and also makes the option in-the-money on the "true" date of grant.
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