The Black Scholes equation is one of the most widely recognized methods used to value employee stock options in publicly traded and privately owned companies. It is frequently the basis for determining fair value in financial reporting for equity compensation (share based payments) under ASC 718 (f/k/a 123R) and the recognition of the corresponding income statement expense and balance sheet liability.
This course teaches you how to use Black Scholes to value employee stock options in any company. You will gain a basic knowledge of stock options and how Black Scholes works. You will learn how to correctly determine the key inputs required in the equation based on professionally recognized methods and best practices.
The focus of this course is on how to use the equation, not the complex Nobel prize-winning mathematics behind it. With the information provided in this course, you will be able to successfully run Black Scholes on various software platforms, Microsoft Excel™ spreadsheets, or other specialized calculators. As a bonus, a Microsoft Excel™ based worksheet template for the Black Scholes equation will be included for course participants.
We begin with a summary of the basic concepts and economic theory relating to employee stock options. We provide you with a simplified explanation of how the math in the Black Scholes equation actually works. We then show you how to determine basic inputs to the equation: current price, exercise (strike price), risk free rate, and dividends. We then explain how to determine some of the key assumptions used in the equation relating to the expected term and volatility. This includes a discussion of how traditional inputs to Black Scholes must be modified for use with employee stock options. We then review how changes in key variables affect the value determined using Black Scholes. We describe common errors in the use of the equation and provide suggestions to help your audit, review, or documentation process run smoothly. The course wraps up with a short comparison of Black Scholes to other valuation methods for employee stock options.
This course is for financial professionals who may be new to or want to better understand the Black Scholes equation and its use to value stock options issued as equity compensation. The information in this course can help individuals who assemble data/inputs, run calculations, perform reviews, handle communications, or present results based on the Black Scholes equation.
Prerequisites
No Advanced Preparation is required.
Basic knowledge of math and key finance concepts are recommended for this course.
Learning Objective
- Explore the background and uses of Black Scholes.
- Discover a practical understanding of the concept and theory behind the equation.
- Discover best practices and professionally recognized methods to determine all variables used in the equation.
- Identify potential mistakes and errors that may occur in the use of the equation.
- Explore how Black Scholes compares to other methods used to value employee stock options.
Last updated/reviewed: March 9, 2024
(48) Reviews
(18 rating)
The examples would be better if written out. It is hard to catch by just listening.
very good introduction to power query. have not used this function in excel and found it very interesting
Great detail and examples - content was personalized and synthesized nicely by the instructor.
I like to read the slide decks in the pdf format. The pdfs for this course were not sufficient to learn the content.
Exactly as advertised, an introduction to NFP accouinting. As a new board member of an NFP, I found this very helpful. Thank you.
a highly recommended ethics course that hooked my attention the entire time! Great course for ethics credit
Very interesting course! ..................................................................
The presenter did a good job hitting a variety of topics in an interesting way.
It was a good and informative course and was a nice refresher.
Great course. I loved the way he walked thru the steps on charts, then showed the steps to us live. it was good to get the info twice.
This course would be much more effective if all of the files were provided and the student was able to follow along and complete each of the functions being taught.
Very well explained the concept with proper examples. Helps a lot for the corporate cost analysis. Really enjoy the course and easy to follow on his explanation. Great lectures and I will take more of Erik's courses.
Excellent summary of Black Scholes. This course presented a thorough overview of this model.
Excellent course! The instructor did an outstanding job of explaining the concepts. I especially liked the 30,000 feet presentation. I would be very interested in taking other courses from this instructor. He has a gift for explaining a difficult subject and making it simple for the average person.
The examples are very detailed, but if a simplified example could be shown, including the how the calculations are done, it would be very helpful.
Spot on, easier to identify these mistakes while harder to consistently avoid.
Good presenter! Provided beneficial summary of common/preferred stock basics.
This instructor is always my favorite for Excel classes. His slides and presentations are excellent. It's a tad slow but the repetition makes the new formulas stick in my head.
I liked this course as I found that it was very informative and a great refresher on all the many methods and ways in which fraud can occur and be prevented as well.
Excellent presentation while blending in good humor.
Great instructor. Very happy to take the class and learned a lot
Great info, presented concisely. Helpful for professionals hoping to get a basic understanding of the ACA.
Would help to break down example calcs step by step
Good content. Final exam questions were a bit unclear.
I think the course is a good overview for the new standard. I liked the example questions and want to learn more.
Especially appreciated the suggestions for feedback and meetings at the end of the presentation. Thanks Erin.
Very well spoken and concise summary of the major updates
This course was outstanding in helping boost my efficiency and knowledge of excel functionality.
Course was very helpful. Quiz questions were not as aligned to Payroll accounting as they could have been.
Overall great webinar. It would be helpful to reduce the number of abbreviations in the slides though.
Much prefer video presentations. Case facts are much more obvious than typical fraud cases. CPA should never practice again demonstrating no knowledge and/or interest in identifying basis of fair financial presentation or uncovering significant issues with client financials.
This was a good but examination of ethics starting with various scandals and ethics violations to COSO standards to the best practice policies in creating an ethical culture from the top down at a company.
This is a good refresher course for those that have not seen this material since college finance courses
I found this course to be very well presented with clear action items that I am excited to start implementing!
Thank you very much. very good introduction to new revenue recognition. next time I hope to have more examples.
Love how excited instructor was! Made it easy to stay completely engaged.
Very informative introductory course.
The information was presented in a manner that was easy to follow and digest. Good Course
The discussions on who the likely perpetrators of cyber crime and on red flags of insider information attacks added additional insight to the slides.
would like more mathematical examples using BSM.
Would like to have seen examples calculations incorporated into the slide PDF supporting materials Also, beneficial to have Excel template of Recap of Sales Mix Calculation made available
Very knowledgeable instructor. Course was a good introduction to the types of equity.
Good course!
Links to good black scholes or monte carlo calculators would be beneficial
Excellent course
Good refresher on SEC Reporting and structure of reports
Great tips! Thank you!
l like learn about this course and subject We will follow full courses for an intense love thank you very much
Lesson Questions and Answers0 Questions
INTRODUCTION and OVERVIEW
Background, Theory, and Concepts
- Background 12:22
- Review Finance Theory 11:43
- Black Scholes Concepts and Principles 9:46
The Equation
Problem Solving
CONCLUSION
- Course Summary 0:45
SUPPORTING MATERIALS
- Slides: Black Scholes Basics and Beyond PDF
- Black Scholes Basics and Beyond Glossary/Index PDF
- Sample Black Scholes Employee Stock Option Calculator XLSX
REVIEW and TEST
- REVIEW QUESTIONS quiz
- FINAL EXAM exam
Ask the instructor a question about this lesson