Open AccessA Critical Review of the Fair Value Settlement Procedure for Stock Options
Author(s) -
Oege Pennin,
Martijn J. van den Assem,
Remco C. J. Zwinkels
Publication year - 2015
Publication title -
applied finance letters
Language(s) - English
Resource type - Journals
eISSN - 2253-5802
pISSN - 2253-5799
DOI - 10.24135/afl.v4i1and2.29
Subject(s) - arbitrariness , settlement (finance) , fair value , stock (firearms) , value (mathematics) , economics , law and economics , business , financial economics , accounting , mathematics , finance , engineering , epistemology , philosophy , statistics , mechanical engineering , payment
We review the European practice of fair value settlement of stock options after a successful takeover bid. We argue on both fundamental and practical grounds that the inherent complexity, arbitrariness and inaccuracy of fair value calculations call for replacement by intrinsic value settlement. This alternative is simple, transparent, well-defined, and common practice at other exchanges