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Valuing Employee Stock Options

ISBN: 978-0-471-70512-3
336 pages
October 2004
Valuing Employee Stock Options (0471705128) cover image
A comprehensive guide to understanding the implications and applications of valuing employee stock options in light of the new FAS 123 requirements
Due to the new requirements of the Proposed Statement of Financial Accounting Standards (FAS 123) released by the Financial Accounting Standards Board (FASB)-namely the fact that employee services received in exchange for equity instruments be recognized in financial statements-companies are now scrambling to learn how to value and expense employee stock options (ESOs). Based on author Dr. Johnathan Mun's consulting and advisory work with the FASB consulting projects with several Fortune 500 firms, Valuing Employee Stock Options provides readers with a comprehensive look at this complex issue.
Filled with valuable information on binomial lattice and closed-form modeling techniques, Valuing Employee Stock Options can help financial professionals make informed decisions when attempting to ascertain the fair-market value of ESOs under the new requirements.
Johnathan Mun, PhD, MBA, MS, CFC, FRM (San Francisco, CA), is Vice President of Analytical Services at Decisioneering, Inc., the makers of Crystal Ball analytical software. He is also the author of Applied Risk Analysis (0-471-47885-7), Real Options Analysis (0-471-25696-X), and Real Options Analysis Course (0-471-43001-3), all of which are published by Wiley.
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List of Figures and Tables.

Preface.

Acknowledgments.

About the Author.

PART ONE: IMPACTS OF THE NEW FAS 123 METHODOLOGY.

Chapter 1. Implications of the New FAS 123 Requirements.

Chapter 2. The 2004 Proposed FAS 123 Requirements.

Chapter 3. Impact on Valuation.

Chapter 4. Haircuts on Nonmarketability, Modified Black-Scholes with Expected Life, and Dilution.

Chapter 5. Applicability of Monte Carlo Simulation.

Chapter 6. Expense Attribution Schedule.

PART TWO: TECHNICAL BACKGROUND OF THE BINOMIAL LATTICE AND BLACK-SCHOLES MODELS.

Chapter 7. Brief Technical Background.

Chapter 8. Binomial Lattices in Technical Detail.

Chapter 9. The Model Inputs.

PART THREE: A SAMPLE CASE STUDY APPLYING FAS.

Chapter 10. A Sample Case Study.

PART FOUR: OPTIONS VALUATION RESULTS TABLES. 

Appendix: Getting Started with the Options Valuation Results Tables.

Glossary.

Notes.

About the CD-ROM.

Index.

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JOHNATHAN MUN is Vice President of Analytical Services at Decisioneering, Inc., the makers of Crystal Ball analytical software. His duties focus primarily on heading up the development of real options and financial analytics software powered by Crystal Ball. Prior to joining Decisioneering, he was a consulting manager and financial economist in the Valuation Services and Global Financial Services practice of KPMG Consulting, and a manager with the Economic Consulting Services practice at KPMG LLP. He holds a PhD in finance and economics, and an MBA and MS in management. Mun is also certified in financial risk management and in financial consulting. He is currently a visiting professor in finance, economics, and statistics at various universities, including the University of Applied Sciences (Germany), the Swiss School of Management (Switzerland), and Golden Gate University (California). Mun is the author of Applied Risk Analysis, Real Options Analysis, and Real Options Analysis Course, all published by Wiley. He continues to offer worldwide seminars and lectures on the topics of real options, simulation and risk analysis, and corporate finance.
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