Binomial Model Details

ValuAdder gives you the well-known Hull-White Binomial Model to price employee stock options (ESOs).

This is the central model approved for ESO valuation by the Financial Accounting Standards Board in its 2004 Statement No 123R. It is also endorsed by the IFRS standards for employee stock option valuation internationally.

Using the Hull White Binomial Model you can calculate the value of ESOs based on the following parameters:

• Current company stock price
• Option exercise price (strike price)
• Option expiration time
• Vesting period
• Stock volatility
• Interest on the company’s debt
• Dividend payout rate
• Percentage of employees that leave the company within a year
• Option exercise multiple

The stock volatility is a crucial parameter in estimating the value of ESOs. You can use any of the business valuation methods in ValuAdder to estimate the stock prices and returns for any private or public company.