NOTE: Yahoo Finance made major changes to its website in June 2016.  Consequently, the location of the SEC Filings described in the video has been moved.  The SEC Filings can now be found under the Profile Tab on the Right Side of the page (scroll down if necessary).  They are labeled Recent Events and you may have to click the Show All Events button to find the most recent 10-K: Annual Report.  Since this video is several years old, there are also a number of “cosmetic” modifications to the website and application. These can be ignored. All the other steps and information for selecting a volatility assumption for remain the same.

This video shows step by step how to select a reasonable volatility assumption for valuing employee stock options using the Black Scholes calculation.  Volatility is a required assumption for calculating the “Time Value” of an option and selecting a value is an art not a science.  This is because any volatility assumption that can be justified is appropriate.  Specifically, there are two sources for this data: 1) the issuing company’s annual report and 2) the implied and historical volatility values of the company’s market traded options.   The video will explain how to locate this information on the internet and use it to select an appropriate volatility assumption for the analysis produced by

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