{"id":{"repo_id":"texas","oai_identifier":"oai:repositories.lib.utexas.edu:2152/ETD-UT-2011-12-4728"},"canonical_url":"https://search.dev.ndltd.org/etd/texas/oai:repositories.lib.utexas.edu:2152/ETD-UT-2011-12-4728","repository":{"repo_id":"texas","name":"University of Texas","base_url":"https://repositories.lib.utexas.edu/server/oai/request"},"display":{"title":"Utility-based valuation for underwater employee stock options","abstract":"In this report, we explore the theory behind utility-based valuation of stock options. In particular, we focus on the underwater employee stock options, which give rise to an incomplete-market setting. We begin with basic concepts and terminology in stock-option pricing. Then, we review the valuation by replication process both in the binomial model and the Black-Scholes model. These two methods apply to valuation in the complete-market setting. Then we introduce the concept of utility function and utility maximization in the context of portfolio allocation. An example is worked out to demonstrate how to solve the optimization problem subject to a portfolio constraint. In the end, we explore indifference pricing, i.e., utility-based valuation of stock options in an incomplete single-period binomial model.","abstract_html":"In this report, we explore the theory behind utility-based valuation of stock options. In particular, we focus on the underwater employee stock options, which give rise to an incomplete-market setting. We begin with basic concepts and terminology in stock-option pricing. Then, we review the valuation by replication process both in the binomial model and the Black-Scholes model. These two methods apply to valuation in the complete-market setting. Then we introduce the concept of utility function and utility maximization in the context of portfolio allocation. An example is worked out to demonstrate how to solve the optimization problem subject to a portfolio constraint. In the end, we explore indifference pricing, i.e., utility-based valuation of stock options in an incomplete single-period binomial model.","abstract_has_math":false,"creators":["Zhao, Yunjie"],"institution":"University of Texas at Austin","degree_name":"Master of Arts","degree_level":"Masters","degree_discipline":"Mathematics","degree_department":null,"school":null,"contributors":[],"advisors":["Ẑitković, Gordan"],"committee_chairs":[],"committee_members":["Cudina, Milica"],"year":2011,"date_issued":"2011-12","date_published":"2011-12","updated_at":"2026-07-24T05:01:18Z","subjects":["Valuation by replication","Utility-based valuation","Indifference pricing","Underwater stock options"],"languages":["eng"],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/2152/ETD-UT-2011-12-4728","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.advisor","label":"Advisor","values":["Ẑitković, Gordan"]},{"key":"dc:contributor.committeemember","label":"Committee Member","values":["Cudina, Milica"]},{"key":"dc:creator","label":"Author","values":["Zhao, Yunjie"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2012-02-27T18:53:05Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2012-02-27T18:53:05Z"]},{"key":"dc:date.issued","label":"Date","values":["2011-12"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Mathematics"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Masters"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Master of Arts"]},{"key":"thesis:institution_name","label":"Thesis Institution Name","values":["University of Texas at Austin"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["Valuation by replication","Utility-based valuation","Indifference pricing","Underwater stock options"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language.iso","label":"Language (ISO)","values":["eng"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["http://hdl.handle.net/2152/ETD-UT-2011-12-4728"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description","label":"Description","values":["text"]},{"key":"dc:description.abstract","label":"Abstract","values":["In this report, we explore the theory behind utility-based valuation of stock options. In particular, we focus on the underwater employee stock options, which give rise to an incomplete-market setting. We begin with basic concepts and terminology in stock-option pricing. Then, we review the valuation by replication process both in the binomial model and the Black-Scholes model. These two methods apply to valuation in the complete-market setting. Then we introduce the concept of utility function and utility maximization in the context of portfolio allocation. An example is worked out to demonstrate how to solve the optimization problem subject to a portfolio constraint. In the end, we explore indifference pricing, i.e., utility-based valuation of stock options in an incomplete single-period binomial model."]},{"key":"dc:format.mimetype","label":"Dc Format Mimetype","values":["application/pdf"]},{"key":"dc:title","label":"Title","values":["Utility-based valuation for underwater employee stock options"]}]}],"canonical_facts":{"dc:contributor.advisor":["Ẑitković, Gordan"],"dc:contributor.committeemember":["Cudina, Milica"],"dc:creator":["Zhao, Yunjie"],"dc:date.accessioned":["2012-02-27T18:53:05Z"],"dc:date.available":["2012-02-27T18:53:05Z"],"dc:date.issued":["2011-12"],"dc:description":["text"],"dc:description.abstract":["In this report, we explore the theory behind utility-based valuation of stock options. In particular, we focus on the underwater employee stock options, which give rise to an incomplete-market setting. We begin with basic concepts and terminology in stock-option pricing. Then, we review the valuation by replication process both in the binomial model and the Black-Scholes model. These two methods apply to valuation in the complete-market setting. Then we introduce the concept of utility function and utility maximization in the context of portfolio allocation. An example is worked out to demonstrate how to solve the optimization problem subject to a portfolio constraint. In the end, we explore indifference pricing, i.e., utility-based valuation of stock options in an incomplete single-period binomial model."],"dc:format.mimetype":["application/pdf"],"dc:identifier.uri":["http://hdl.handle.net/2152/ETD-UT-2011-12-4728"],"dc:language.iso":["eng"],"dc:subject":["Valuation by replication","Utility-based valuation","Indifference pricing","Underwater stock options"],"dc:title":["Utility-based valuation for underwater employee stock options"],"thesis:degree_discipline":["Mathematics"],"thesis:degree_level":["Masters"],"thesis:degree_name":["Master of Arts"],"thesis:institution_name":["University of Texas at Austin"]},"updated_at":"2026-07-24T05:01:18Z"}