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Managerial Responses to Incentives: Control of Firm Risk, Derivative Pricing Implications, and Outside Wealth Management

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Figure

Table 1: Standard Parameters
Figure 1:  Managerial Investment in the Index Fund (α)
Figure 2:  Management of Firm Risk (κ) when Holding an Employee Stock Option
Figure 3 displays the optimal proportion  α  of the manager’s outside wealth  Y   to invest
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