Is that the co in question? Trading at $0.32? If so the annualized volatility will be in the triple digits. There is no sound method of valuing the shit. So if you're not working there, don't take the gig. If you do work there; your co's valuation will have to do.
Finding Annualized Volatility for Black Scholes Option Pricing?
- Thread starter Fain
- Start date
Is that the co in question? Trading at $0.32? If so the annualized volatility will be in the triple digits. There is no sound method of valuing the shit. So if you're not working there, don't take the gig. If you do work there; your co's valuation will have to do.
Not much precision. Just a ball-park calculation.
Calculate the historical volatility of the shares. Use that figure. Or find analogs that are listed companies with listed options and use that as a proxy.
Not sure what you mean by "co's valuation".
There's about 7-8 companies total. Companies usually apply a valuation to stock options given to directors so I wouldn't say that there's "no sound method". Obviously they are finding the annualized stock volatility when they are provider their disclosures on Executive compensation etc.
This is my original question. Where to find the historical volatility of the shares?
The grantor firm has to price the contingent liability - ask them. Annualized is pretty worthless in many cases. Stock could be 0 annualized. I would argue the front implied, unless there is a corporate event, is the best gut guess. Leaps don't handle volatility well - they are more about net carry.
why do you say LEAPs don’t handle volatility well?
The longer time the more normal the distribution - so BS doesn't work well for discovering Leap Greeks. The farther in time you go the carry begins to have more weight than the volatility. Google will send you to some Leap models. The pricing in BS is decent, but the Greeks aren't.
Longer-dated stuff needs a rate forecast and a div. growth estimate.
Longer-dated stuff needs a rate forecast and a div. growth estimate.
And they would dispute any figure. It's your job (the OP) to question their valuation.