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Black-Scholes Option Valuation Factor Table at $1 of both Exercise Price and Stock Option

by Steve Shaw

210 pages; quality trade paperback (softcover); catalogue #02-0670; ISBN 1-55369-857-6; US$39.95, C$51.00, EUR33.15, £22.97

Nobel prize winning stock option model simplified in investor guide! Imagine determining the "Black-Scholes" fair value of your stock options from a table in a way similar to using a present value table. Now you've gotten it! This book provides investors with a simple way to apply the Nobel prize winning "Black-Scholes Option Pricing Model" in valuing your stock options without going through complicated computer programs.

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about the book      about the author      sample excerpts or Table of Contents      catalogue info

About the Book BLACK-SCHOLES OPTIONS VALUATION FACTOR TABLE AT $1 OF BOTH EXERCISE PRICE AND STOCK OPTION" provides you with a simple classic way to use Nobel prized "Black-Scholes Option Pricing Model" in valuing stock options granted at the market price. The basic assumption is that the stock options are granted at the market price, which is true for most companies, although some companies do grant options at premium or discount to the market price at the date of grant. This book gives the Valuation Factors (per share Black-Scholes value) of option, assuming both exercise price and stock price are $1, at different combinations of estimated dividend yield, expected life of options, risk free interest rate, and estimated volatility. Determining the value of stock options with this book is similar to defining the present value of future payments by using a present value table at $1. Investors first find a Valuation Factor by matching their assumptions on risk-free interest rates (using Treasury STRIPS), estimated dividend yield, expected life of options and estimated volatility, and then multiply it by either the exercise price or the stock price followed by the number of shares. With this book, business professionals can easily prepare their FAS 123 pro-form disclosures on both their annual and interim reports as required by SEC.

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About the Author Steve Shaw, a senior financial analyst in NY, Steve Shaw is a member of the National Association of Certified Valuation Analysts (NACVA) and an affiliate member of New York Society of Security Analysts (NYSSA). He has an MBA degree from Pace University, New York and a bachelor's degree in statistics. As the person who first introduced the concept of Black-Scholes Option Valuation Factor, he owns the provisional patent of Black-Scholes Option Valuation Factor at $1. He is also a member of Beta Gamma Sigma, the honor society for collegiate schools of business in America.

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Excerpts

Part I - INTRODUCTION

Chapter 1 (What is Valuation Factor?) briefly introduces the concept of valuation factor, which is the per share value of options, assuming such options are granted at the market price of $1, by using Black-Scholes Option Pricing Model. As long as the exercise price equals the market price of the underlying stock, the per share fair value of options can be obtained by multiplying the valuation factor by either the exercise price or the stock price.

Chapter 2 (Why it works?) mathematically explains why the Valuation Factor works. It sounds pretty complicated to prove it, but all I needed was a basic mathematical background and some common sense.

Chapter 3 (How to use it?) is a one-page instruction on how to use the tables included in this book. It provides a three-easy-to-follow-step instruction and the big picture of tables for step 1. At the bottom of every table, an example is given for better understanding valuation factors as well as Black-Scholes Option Pricing Model.

Part II - BLACK-SCHOLES OPTION VALUATION FACTOR TABLE AT $1

This part provides 130 tables of valuation factors under different combinations of assumptions of expected dividend yields, expected lives of options, estimated risk free interest rates and estimated volatilities of the underlying stock, assuming both the stock price and the exercise price are $1. The scenarios for each of these four inputs are made with an intention to cover the majority of market based on my experience and research. Dividend yield rates are ranged from 0% to 10%, expected lives of options from 3-month to 10 years, risk free interest rates from 1% to 15.75%, and estimated volatilities from 0.00001% to 400%.

APPENDIX

Appendix I (Introduction to Black-Scholes Option Pricing Model) briefly introduces the history of Black-Scholes Option Pricing Model, and also includes analysis of impacts of each of the six inputs on the value of options.

Appendix II (How to Make Assumptions?) provides simple guidance on how to make assumptions on the required inputs: risk free interest rate, expected dividend yield, expected life of option and estimated volatility.

Appendix III (How to Calculate Historical Volatility?) provides you with a practical spreadsheet model to calculate historical volatility of the underlying stock.

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Catalogue Information

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