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Journal of Finance Vol. 57 No. 2 2002

The Volatility and Price Sensitivities of Managerial Stock Option Portfolios and Corporate Hedging

John D. Knopf1; Jouahn Nam2; John Thornton3,4

1 Seton Hall University · 2 Pace University · 3 Kent State University · 4 Xi'an Jiaotong University

Abstract

We use estimates of the Black—Scholes sensitivity of managers' stock option portfolios to stock return volatility and the sensitivity of managers' stock and stock option portfolios to stock price to test the relationship between managers' risk preferences and hedging activities. We find that as the sensitivity of managers' stock and stock option portfolios to stock price increases, firms tend to hedge more. However, as the sensitivity of managers' stock option portfolios to stock return volatility increases, firms tend to hedge less.

DOI
10.1111/1540-6261.00442
Volume
57
Issue
2
Pages
801-813
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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