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Option pricing model for share based payment valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Option pricing model for share based payment valuation

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 5, 2019 at 6:15 pm #519181
    dennis98
    Member
    • Topics: 34
    • Replies: 42
    • ☆☆

    Is the following true?
    An option pricing model such as Black Scholes is used to value a cash settled share based payment scheme at each year end during the scheme.
    An option pricing model such as Black Scholes is also used to value an equity based share based payment scheme, but only at the grant date.
    Thank you.

    June 5, 2019 at 7:55 pm #519227
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Yes, why wouldn’t it be? Cash settled schemes are valued at each reporting date, and equity settled at the grant date.

    Thanks

    June 5, 2019 at 10:22 pm #519251
    dennis98
    Member
    • Topics: 34
    • Replies: 42
    • ☆☆

    Thanks. So Black Scholes is used for both, yes? Not just for equity based.

    June 12, 2019 at 1:28 pm #520302
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    It is more relevant for equity settled, but could be used too for cash settled if necessary.

    Thanks

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