Dividend Assumption Impact on Employee Stock Option Time Value and the Insight Ratio

By: Bill Summers, CPA, CFP®, MST Introduction: When using StockOpter.com the question often arises as to whether the dividend yield should be used to calculate the Black-Scholes and time value. This question is often asked with regard to the Insight Ratio® (time value divided by Black-Scholes value). This paper explores the ramifications of using the dividend yield for purposes of calculating the Insight Ratio®. We also present an analysis of the sensitivity of including the dividend yield under several scenarios....

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