Lattice or Black-Scholes: That is the question...

Sponsored By SYNCBASE, Inc.

Topics:

Accounting > Balance Sheet

Banking & Capital Markets > Equity

Employee Benefits & Human Capital > Compensation

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Abstract:

With the introduction of FAS123(R), many companies are struggling with which option pricing model to use for expensing their options. And FAS123(R) is not helping: it leaves the choice of the pricing model to the reporting issuers. This article compares the two main methods of pricing options that are addressed in FAS123(R), and at the end of the article, provides a simple check list through which the reader can determine which method would be ideal to use for his/her company. The two methods for pricing options are either the Black-Scholes (also sometimes called Black- Scholes-Merton) method or the Lattice/Binomial method.

DETAILS

Sponsored by: SYNCBASE, Inc.

Released: May 13, 2009

Length: 3 pages

Format: PDF (64 kb)

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