Abstract
In this paper, we have investigated how an investor’s income, who is rewarded by managing dual company stocks and additionally receives stochastic income, grows. We have calculated the optimal stock price and the optimal stock output that maximize his returns. We have shown that the best strategy is to choose from the set of prices .
Highlights
Open AccessIn this paper, we derive the return for an investor who is rewarded with company stock number of αi,i = 1, 2 units for managing two non-traded geometric Brownian motion risk assets Si (t ),i = 1, 2 and receives stochastic income which accrues at the rate n (t,Yt ) ≥ 0, by trading in options
We derive the return for an investor who is rewarded with company stock number of αi,i = 1, 2 units for managing two non-traded geometric Brownian motion risk assets Si (t ),i = 1, 2 and receives stochastic income which accrues at the rate n (t,Yt ) ≥ 0, by trading in options
We want to investigate to what extent a stock based compensation for an investor who earns stochastic income at time t ∈[0,T ] that outperforms the strictly stock units compensation scheme
Summary
Other works that motivated the approach used in this paper are Chen [6] and Huisman, et al [7] Both ([6] [7]) applied the method of value matching and smooth pasting conditions to find the optimal investment threshold and the investment value function of an investor. As a sequel to Chen [6] and Huisman, et al [7], we want to find the optimal investment thresholds of Si (t ) for i = 1, 2 , and the expected investment value function for an investor who is compensated with a number of company stock units αi ,i = 1, 2.
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