The Use and Application of Option Pricing Modeling

The use and application of the Black Scholes Option Pricing Model in business valuation has come under increased scrutiny as of late. Since its inclusion in the AICPA's practice aid in 2004, critical examination and a deep economic downturn have drawn its use and appropriateness into question. Indeed, this model was the subject of rebutting articles in BVUpdate in January and March of this year: "Does Black Scholes Overvalue Early Stage Company Allocations?" and "Lognormal Distributions vs. Empirical Observations – A Defense of the Option Pricing Method," respectively. In "The Use and Application of Option Pricing Modeling" James Walling and Scott Beauchene, each a co-author of these articles, will join BVR to discuss both how to appropriately utilize this valuation tool and its applicability in light of a practice aid update and a turbulent economy.

This program is eligible for self-study CPE credit

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Program Agenda:

  • Introduction: Reconciling the BVR articles and identify key concepts
  • Black-Scholes: what you need to know about its underlying assumptions
  • Identifying fact patterns best suited to the option model
  • Practical application challenges and examples
  • Introduction to alternative or adjusted models
  • Q&A

Learning Objectives:

  • Identify best practices in option pricing modeling and the reasoning behind assumptions and expectations often used by valuers
  • Associate studies performed on option pricing methods with information about the reliability and outcomes of those models
  • Define Merton's theory
  • Associate changes to standard and emerging option pricing models with both assumptions about inputs and case scenarios as well as expected modeling outcomes

CPE Information

Prerequisites: Knowledge of Business Valuation
Program Level: Advanced
Preparation Required: None
Delivery Method: QAS Self-Study
Recommended CPE: 2 (Specialized Knowledge & Applications)

Business Valuation Resources, LLC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website:
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