Executive Compensation Often Comprises Stock Options

question 16

Multiple Choice

Executive compensation often comprises stock options. These options have vesting periods, and may not be exercised for a while. Which of the following actions might an executive take to help her mitigate the risk of her stock option grants?

• A) Enter into an equity swap where she receives the company's share price returns in exchange for paying Libor.
• B) Short futures on a broad market index.
• C) Short her own company's stock.
• D) Buy put options on her own stock.

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Definitions:

Special Certification

Recognition or validation that an individual or entity has met a specific set of standards or qualifications, usually in a professional context.

Legal Aid Office

A nonprofit organization that provides free legal services to individuals who cannot afford to hire a lawyer, typically in civil matters.

Needy

Individuals or groups requiring assistance due to poverty, deprivation, or significant need.

Defendant

A party against whom a lawsuit is brought.