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SBC VALUATION SUITE · THE STANDARD ASC 718 / IFRS 2 MODEL

Black-Scholes-Merton stock option fair-value calculator

The closed-form valuation model the SEC, FASB, and IASB all accept as the default for service-condition stock options. Six inputs — current stock price, strike, volatility, risk-free rate, dividend yield, expected term — produce a per-option fair value. Multiplied by the option count, this is the total grant date fair value that will be expensed over the vesting period under ASC 718. The "show the math" panel reveals d₁, d₂, N(d₁), and N(d₂) so the auditor can trace every number.

Closed-form
No iteration, no library
Per-option FV
Dollars per option
Grant FV
FV × option count
Audit trail
d₁, d₂, N(d₁), N(d₂)
STAGE 1 OF 4

Current stock price and strike

For public companies, the stock price is the closing price on grant date. For private companies, it is the most recent 409A valuation. The strike is set by the board at grant.

$
Closing price on grant date (public) or 409A FMV (private). Granting below FMV creates IRC §409A liability.
$
Set at grant by the board. At-the-money grants (K = S) are typical — intrinsic value is zero but time value is significant.
STAGE 2 OF 4

Volatility, risk-free rate, dividend yield

Volatility is the single most-leveraged input. Private companies derive it from a peer group of comparable public companies. Risk-free rate uses the Treasury yield curve matched to expected term.

%
Annualized standard deviation of log returns. Public: historical or implied. Private: peer-group median, typically 35-55% for growth companies.
%
U.S. Treasury yield matched to the expected term, as of grant date.
%
Most growth companies and private companies use 0%. Dividends reduce option value because they reduce the stock price.
STAGE 3 OF 4

Expected term and option count

For private companies, the SEC simplified method is widely used: (vesting period + contractual term) / 2.

4-year vest + 10-year term → simplified method gives 7.0 years. 1-year vest + 10-year term → 5.5 years.
Total options in this grant. Total fair value = per-option fair value × option count, expensed over the vesting period.
Use case examples. Stock option grant for a new senior engineer. Annual executive equity refresh. ISO grant to founding employees. Director option grant. Each requires its own Black-Scholes calculation as of its own grant date.
STAGE 4 OF 4

Per-option fair value, total grant fair value

WANT THE METHODOLOGY BEHIND THIS TOOL?
Read more in the CFO Guide.
The tool gives you the answer. The guide gives you the argument — the case law, the worked examples, the negotiation playbook, the cross-check tables, the exception cases.
The methodology behind this calculator is in Ch 19 Stock-Based Compensation of the reference guide.
Read more in the CFO Guide → Browse all 22 guides
Educational references and tools — not legal, tax, accounting, or investment advice, and not a recommendation to buy or sell any security. Consult a qualified professional about your specific situation. © 2026 The Baratelli Institute.

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