Black-Scholes option pricing model

[Remy Dalmulder]

Dear Statalist members,

This is my first time working with stata and i have trouble finding the right variables within Exucucomp. Within my thesis i'm trying to measure the equity incentives for CFO. I have chosen the method used by Core and Guay (1999) to calculate

S = price of the underlying stock ---- ------------------------------------> I found the variable PRCC or PRCCF
X= Exercise price of the option ----- -----------------------------------------> I found the variable EXPRICE
Sigma= the expected stock return volatility over the life of the option --->i found the variable BS_Volatility
T= time to maturity---------------------------------------------------------------> i found the variable EXDATE
R= Risk-free interest rate ------------------------------------------------------ > i found the variable Risk_Free_Rate
D= expected dividend rate -----------------------------------------------------> i found the variable BS_Yield

I also follow Core and Guay in their distinction between options granted in the current year, those awarded in the previous year but not yet excercised and those from previous year but are currently unexercisble. I have the following variables:

# Number of options granted ( Current year) -----------> OPTS_GRT
# Numbers of exercisable options-----------------------> OPTS_UNEX_EXER_NUM
# Number of unexercisble options-----------------------> OPTS_UNEX_UNEXER_NUM
Current realizable value for both exercisable and unexercisable ------> ?

Can someone please verify or correct whether these variables are right?

Thank you so much and my apologies for this utter basics i do not seem to grasp.

[Phil Bromiley]

You'll get a more helpful answer if you follow the FAQ on asking questions - provide Stata code using code delimiters, Stata output, and sample data using dataex.

Your question is really about Execucomp, not Stata. Look at the website you're getting the data from - it may have a discussion board or other resources directly related to your issues. WRDS certainly has some helpful posts. Alternatively, look further in the literature - some finance papers are very explicit about the variables they use. If you're a student, your adviser should help you.

Whether the Execucomp variables are right is not exactly what this list is for. The list deals more with Stata and estimation issues. Only a minority of the users work with corporate data and tiny minority use Execucomp. I thought Execucomp provided option values, although it may use corporate reports and so not use identical valuation methods/parameters across firms.

[Remy Dalmulder]

Thank you, i already came to that conclusion after reading FAQ. Therefore, i made a post on WRTS. I am indeed a student. My advisor was currently busy so i tried doing it myself. Exucomp indeed provides option values, but i get a higher grade when i calculate it myself.

thanks again for taking the time to answer.