How to Calculate the Stockholders´ Cost of Stock Option Incentive

In this paper we discuss the risk discount and cost of stock option contracts based on theory analysis and arithmetic operation. First the calculation of data shows that expectation value cost increases with the rise of exercise price, with the same result as the previous prediction. Meanwhile, B-S cost can become larger or smaller with higher exercise price, which suggests that the expectation value cost is more reasonable. Then we explore the relationship between the expectation value cost and the B-S cost in stock option contracts based on theory analysis and discover the rational explanations for the above conclusion.