DAO Web Page of Fame

Celebrating Summer Successes Since 2006

  INDUCTEE:  Alex Holsenbeck

YEAR:   2007

CATEGORY: Regression

 


When Alex Holsenbeck was given the challenge
to figure out how many options would be exercised by Embarq insiders in the future he began to panic. But then he realized that he probably had learned everything he needed in DAO. After dusting off the cobwebs, Alex used regression as the back bone for a Crystal Ball model that helped Embarq forecast the financial impact of future insider options exercising.

The first step was to perform a regression based on historic exercise rates vs. specific stock price reference points. Validating the regression output with academic research on lag effects, Holsenbeck found that 10-day lagged reference points were the most robust. Exercise rates from the historical regression data were then used as key inputs to the simulation model. The combination of exercise rates and stock price paths that were simulated resulted in a range of future option exercising.

Alex survived the thorough review from the Treasury group, and soon the model was used throughout the finance department. The tax group and cash flow statement guru were particularly heavy users, and Alex knew that all the regression practice in class had paid off.