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The assumptions a company develops when measuring the fair value of employee stock options or other equity instruments generally will have more impact on fair value than the option-pricing model it uses. This chapter discusses the key assumptions that drive fair value, certain simplifying alternatives available in limited circumstances, and techniques for analyzing historical and current data used to develop and support the following assumptions:
  • Expected term
  • Expected volatility
  • Risk-free interest rate
  • Expected dividend yield

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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