A New Executive Stock Option Pricing Model

Two problems of application of Standard Options pricing models in the practice of executive incentive plans were argued.The paper analyzes how asian options and indexed options pricing models deal with above two problems and proposes to design a new incentive option model,called A-I model,which combines both of the asian options and indexed options'characters.And based on the no-arbitrage method,risk-neutral measure,ITO theorem and first order and second order moment method,its pricing model was derived.Numerical results show that this model has better incentive effects than others.