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At the end of the vesting period, shares are exercised at intrinsic value or exercise price?
Because, in one example in text, its showing intrinsic value..but i think it should be exercise priceAnd in which settlement (equity and cash), do we use the option pricing model?
Hi,
The shares will be exercised at the exercise price and we use the option pricing model to value the equity settled share based payment.
Thanks
Okay, so the option pricing is used only if we don’t have a proper fair value for the shares?
Its like the 2nd alternative correct?Hi,
It’s easy to get the fair value of cash settled as it is just the difference between the current share price and exercise price.
You sound like you’re getting confused a bit though. We’re using the option pricing model to value the option on the shares, not the shares themselves.
Thanks
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