Under "fair value reporting," options are valued using the Black-Scholes option-pricing model
, a binomial model, or some other acceptable model with modifications allowed for early exercise and other factors.
I am also responsible for naming the model, "the Black-Scholes Option-Pricing Model.
This section has explored conditions under which the Black-Scholes option-pricing model can be validly applied to the pricing of assets with derivative-security-like structures, even when the underlying asset-equivalent is neither continuously traded nor continuously observable.
Myron Scholes, Nobel Laureate in Economic Sciences and co-originator of the Black-Scholes option-pricing model
RELATED ARTICLE: THE BLACK-SCHOLES OPTION-PRICING MODEL
75 value per option using the Black-Scholes option-pricing model
The fair value of options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for the stock options granted since the beginning of the year:
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.
The Black-Scholes option-pricing model is by far the most popular approach.
Companies should train employees to use the Black-Scholes option-pricing model just as they train them to use other sophisticated models under varying levels of uncertainty.
If the Board goes this route, there is still value in knowing how to compute a stock option value using the Black-Scholes Option-Pricing Model
as illustrated in the FASB's exposure draft.
Longport valued the stock options using the Black-Scholes option-pricing model