NO.PZ2023091901000021
问题如下:
Firms commonly incentivize their management to
increase the firm’s value by granting managers securities tied to the firm’s
stock. Some securities, however, can reduce managerial incentives to manage
risk within the firm. Which is likely the best example of this type of
security?
选项:
A.Deep in-the-money call option on the firm’s stock
At-the-money call option on the firm’s stock
Deep out-of-the-money call option on the firm’s stock
Long position in the firm’s stock
解释:
Deep out-of-the-money calls have no value unless the firm value increases substantially, so providing deep out-of-the-money calls as an incentive could cause managers to take substantially higher risks and perform, less hedging, With an at-the-money call, managers could still be incentivized to take greater risks but they would not have to aim for as large of a stock price increase to recognize significant value from their options, so the danger of mismanaging risk is less. A deep in-the-money call would have a similar investment profile as a long equity position and both of the latter choices would provide the least managerial incentive to reduce risk management.
A deep in-the-money call would have a similar investment profile as a long equity position and both of the latter choices would provide the least managerial incentive to reduce risk management