Risk Innovations Introduces Model Options

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Risk Innovations, LLC announced today the introduction of Â?Model Options,Â? a new type of option that is designed for use in situations where there is no liquid options market or when there are concerns about potential market impact or manipulation. Model Options are particularly useful as employee stock options.

“Individuals and businesses do not use options nearly as much as they should,” said Bruce Thomas, President of Risk Innovations. “Model Options help people make better use of the leverage that options can provide by making option valuation more understandable, more certain, and less subject to potential manipulation.”

A Model Option is a new form of option that uses an option pricing model to determine the contract’s value. Instead of relying exclusively on the market to determine the appropriate value, Model Options specify how an option will be valued by describing an option pricing methodology and how each of the inputs to that calculation will be derived.

“As a form of incentive compensation, Model Options can provide beneficial leverage while better aligning management interest with stockholders’ objectives for long-term share appreciation. In addition to reducing compensation expense, Model Options make share-based compensation more justifiable, more transparent, and less subject to manipulation,” said Thomas.

The objectivity and transparency of this method reduces the potential for regulatory scrutiny and litigation that could arise from charges that FAS 123(R) had been misapplied in some way. “Since Model Options specify precisely how they will be constructed and valued, there can be no debate about which option valuation model should have been used or how the inputs to the model should have been calculated,” said Ware Preston, Risk Innovations’ Vice President. “This makes ESOPs easier to administer and less subject to second guessing by disgruntled shareholders, employees, and third-parties.”

Patents are pending on the business methods underlying Model Options, and Risk Innovations is currently in discussions with compensation consultants and large companies about using these methods to develop their incentive compensation programs.

Risk Innovations, LLC helps find and promote solutions to complex business issues. More information about Model Options can be found on the company’s Website.


Bruce Thomas


[email protected]


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