July 19th, 2002

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Black-Scholes option price evaluation

Here's an online calculator for the Black-Scholes method method of valuing options. This is the method that companies such as Coca-Cola and The Washington Post group are using to value stock options granted to employees, and will be written off as an expense. Other companies, such as Intel (and probably my employer) are balking at doing such a thing. The stated reason is that their companies grant more options, their stock price is more volatile, and that the stock option expiration period is much longer than Black Scholes anticipated. Hence, they say, Black Scholes over values the options, and they would be expensing something that is not realistically related to the options actual value. They may be right, but the real reason they don't want to do this is because they would be reducing their reported income by incredibly large amounts (Intel would reduce theirs by around 80%) and that would just make them look bad.

In any case, I really need to read up on this method of valuing stock options. It just seems interesting. Is there an economist buried inside me?

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Popularity

Laurie (rowansilverwing) made a poll out of boredom asking people on the crack bored whether or not they would date her. This was yesterday. Kim (burgunder) talked some about her own impulse to do something similar, although she hadn't yet pushed herself over the hump. Anyway, I made an offhand comment to that I would do such a thing, mostly to find out if I had any secret admirers. Then I wandered off to a meeting here at work. I came back and hour or two later, and, lo and behold, Karri (insolent) had taken it upon herself to post one for me.

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Oh, and there are 2 votes for "already have dated Phil." Which is just odd, considering that I've only dated one person who frequents the crack bored, although I have fooled around with more than that. Of course, it could be just someone with Darren's sense of humor. But there's the little voice in the back of my head that says there's a person not entirely in touch with reality who likes me a lot.