Alexandros Bougias - Publications

Michopoulos, I., Bougias, A., and Tsekrekos, A. E. (2025). Closed-form approximation of stock-based awards with moving average vesting conditions.
The Journal of Futures Markets

Abstract. A market-based compensation award with a moving average condition becomes vested when the d-days moving average stock price exceeds a predetermined threshold. The same mechanism applies to the economic characteristics of founder shares issued in connection with special purpose acquisition company (SPAC) transactions. This paper employs results from the valuation of barrier and Parisian options to provide a closed-form approximation on the fair value of market-based awards and SPAC transactions as a robust and fast alternative to Monte Carlo simulation techniques. Our method accounts for different exercise strategies, including immediate exercise upon vesting, exercise at maturity, and exercise at the mid-point between vesting and option maturity. We perform a plethora of numerical tests and conclude that our approximation performs well across different levels of equity volatility, risk-free interest rate, moving-average period, option moneyness, and time-to-maturity. We highlight the significant implications of our approach for companies, valuation practitioners, and audit teams.

Michopoulos, I., Bougias, A., Episcopos, A., and Livanis, E. (2024). Measuring ESG Risk Premia With Contingent Claims.
The European Journal of Finance

Abstract. We propose a contingent claims approach for estimating ESG risk premia from market information and market participants' decisions. To this end, we infer the asset value dynamics via the structural model of Merton [1974, “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.” Journal of Finance 29: 449–470.] for a large panel of S&P 500 firms using an estimation algorithm that utilizes the information embedded in stock market prices, CDS spreads, and default probabilities. We find a statistically significant relationship between the ESG score and the volatility and drift terms of the asset value process, suggesting that ESG factors are structurally connected to the value of the firm. We establish a mapping between ESG scores and the cost of equity and debt as implied by firm's contingent claims, and derive estimates of the ESG risk premium across different ESG and leverage profiles. In addition, we break down the ESG risk premia by industry, and demonstrate how practitioners can adjust the weighed average cost of capital of ESG laggard firms for valuation and decision making purposes.

Bougias, A., A. Episcopos, and G. Leledakis (2022). The role of asset payouts in the estimation of default barriers.
International Review of Financial Analysis, Vol. 81, No. 102091

Abstract. In the barrier option model of corporate security valuation, the firm’s creditors impose a default-triggering barrier on the firm value to protect their claim. Two disputed issues in the literature are whether the implied default barrier is positive, and whether it is above or below the book value of the firm’s liabilities. We extend the model of Brockman and Turtle (2003, Journal of Financial Economics 67, 511–529) by embedding asset payouts in the valuation of shareholders’ equity. Using a sample of US stocks from the NYSE, AMzEX, and NASDAQ exchanges, our paper exploits market and firm information to compute the implied default barrier for thirty 2-digit SIC groups, including industrials and banks. Our results show that the implied default barrier is lower than it is in the received literature, and it can be less than total liabilities, even zero for some firms. The implied physical default probabilities are significantly lower in the presence of payouts, providing a closer fit to the historical corporate default rates, particularly for issuers of speculative-grade bonds.

Bougias, A., A. Episcopos, and G. Leledakis (2022). Valuation of European firms during the Russia-Ukraine war.
Economics Letters, Vol. 218, No. 110750

Abstract. We infer the asset value dynamics of European firms during the Russia-Ukraine war via the structural model of Merton (1974). Using high-frequency stock price data, we find that the war led to lower corporate security prices and higher asset volatility, eventually shifting asset values closer to the default region. On average, the balance sheet of European firms is expected to shrink by 2.05% and their 1-year default probability to increase from 0.32% to 2.12%. Regression analysis on asset and equity returns as well as default probability changes suggests that these effects are stronger for firms with large revenue exposure to Russia.