Page 148 - CFF
P. 148
Stock options
Methods of valuing stock options
• The Black-Scholes option pricing model
– Best method, theoretically speaking
– Not accepted in all jurisdictions
• The intrinsic-value method
– Simple, but inaccurate
• The adjusted intrinsic-value method
– Generally results in value lower than Black-Scholes model
• Stock options — Characterization
– Employer intention in granting the option important
– Vesting issues
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