Problem

21. Employee stock options have additional risk over and above standard call options in th...

21. Employee stock options have additional risk over and above standard call options in that the employee may not be able (or allowed) to cash in the option in the event of termination of the employee's job with the firm if the option is not vested. But if the option is vested, and immediate exercise in the event of termination is possible, should it be worth as much as a standard American option on the firm's stock price? Explain.

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Solutions For Problems in Chapter 7