The Research Of Optimum Design And Efficency Of Managemer Index Stock Option

The separation of ownership and control rights is one of the major characteristics of modern enterprise system. For such characteristics of functions separation, the modern companies have to face the system cost--agency problem at the same time of exerting its unique economic advantages. In order to solve this agency problem, many enterprises at home and abroad have introduced the stock option incentive contracts. This kind of contracts builds a direct link between the manager's interests and the enterprise's performance, then the shareholders'interests is consistent with the manager's and staff's, so the manager moral hazard and opportunism behavior have been curbed effectively. However, due to the technical design flaws, the stock options incentive contracts can not rule out the systemic risk's impact on their incentive effects which lead to great reduction of the incentive effects:encourage the managers who have poor absolute performance caused by the systemic risks or punish the managers who have better absolute performance caused by the system risks. Therefore, in order to improve the incentive efficiency of stock options, according to the relative performance evaluation principle in the theory of managers'payment, this paper have designed a multi-index relative exercise price stock options which incarnates the optimal risk-sharing principle, and have done some research on its incentive efficiency. This research would benefit deepening the theoretical study of stock options, provide a theoretical basis for the spread of the stock options, promote people's profound understanding of the stock options incentive system, and provide reference for the establishment of the stock option incentive plan of China's listed companies.Basing on the basic principle of information economics--Principal-agent Theory, this paper has studied the stock options incentive model, the cost and the value of stock options from the view of mathematical analysis. Concretely, using financial engineering approach, it has designed inspired financial products in accordance with specific circumstances:options exercise pricing model which reflects the principle of optimal risk-sharing, options exercise pricing model which can control managers performance standards and the company's specific risk, and numerical analysis of their value and sensitivity about related changes of the fixed,absolute and relative indexation exercise price stock options; combining the quantitative and qualitative analysis method, this paper also has studied incentive effects and performance of the stock options. Through the above research, this paper made the following results:(1) The introduction of new ideas about designing of stock options incentive contracts:Through the review of the research of stock options incentive contracts, we found:Managers stock options using re-pricing and single indexation to introduce the relative performance evaluation into design of stock options contracts, however, reviews found that such design can only eliminate parts of the system risks'impact on managers stock options incentive contracts, and as a result the incentive efficiency of the managers stock options will be restricted. Therefore, this paper has proposed a thought of combining the relative option income structure and the exercise price and a variety of indexes.(2) New thoughts about traditional analysis of the efficiency of stock option incentive contract:Previous studies on stock option incentive efficiency tended to adopt qualitative analysis mainly. While in this paper, when the efficiency of traditional stock options was analyzed, we based on stock options incentive, and analyzed stock options'impact on the behavior of managers through its impact on the incentive contracts. All of this made the study has a certain persuasion. What is more important is that the binary tree model was adopted when we analyzed perception cost of the stock options, thereby overcoming metric flaws about the B-S model.(3) Innovation of financial product and the incentive contract:With the introduction of new ideas of relativization and multi-index, this paper used some theoretical tools such as random process, ITO lemma to model the relationship of multi-index and exercise price. And referencing the B-S thoughts, we obtained formula for calculating the value of the European relative multi-index stock options. And also, under the guidance of the pricing of American option, we developed expression for the value of American relative multi-index stock options. Therefore, two kinds of new financial product or new incentive contracts were created.(4) New findings of the study conclusions:Basing on European and American relative multi-index stock options'value expression, analyzing with typical parameters and examples, we access to new research findings:indexation options is more efficient than the traditional options; the relative options is more efficient than absolute options; multi-index options is more efficient than single-index options. Especially in the study of examples we found:stock options'value will change in the order of magnitude after indexation; and options symbols may also change. Therefore, that the exclusion effect of the traditional stock options or single-index stock options on the system risks is not ideal was confirmed.(5) Application innovations of research findings:from analysis of the prospects and conditions of implementing index manager stock options in China's listed companies, we can see that the existence of large systemic risks in our stock market would benefit the implementation of index manager stock options, and the index manager stock options would have fewer constraints. In addition, according to the actual situation in China, this paper have constructed scale, ownership and the industry indexes to adjust the exercise price.