Share based payment — OpenTuition Forums

SSyfar9y ago

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 price And in which settlement (equity and cash), do we use the option pricing model?

P2-D2Tutor9y ago#1

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

SSyfar9y ago#2

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?

P2-D2Tutor9y ago#3

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