Modelling Stock-Settled Restricted Stock Unit Expense in EXCEL

About the Course

The course begins with a description of what a restricted stock unit is and what its fair value is in terms of IFRS 2 based on stock or cash settlement. It differentiates between the value of an RSU from the company’s perspective and the value to an employee.

This is followed by a step-by-step walkthrough of valuing a stock-settled RSU with certain service and market vesting conditions for determining the expense for accounting disclosure purposes. This entails:

• Simulating the price of the underlying stock using a Monte Carlo Simulator both for normal and antithetic scenarios
• Factoring the market condition into the model at each future point in time
• Assessing the likelihood of meeting the market condition
• Factoring in forfeitures
• For each trigger event, determining of probabilities of termination and vesting
• Calculating the Total Expected Cost for the RSU
• Calculating the cumulative RSU expense from grant date to valuation date

Learning Objectives

After taking this course you will be able to:

• Simulate price of a stock using the Black Scholes Merton Terminal Price formula
• Build a model to factor in market conditions and forfeitures
• Calculate expense for a stock settlement RSU that depends on satisfying both service & market conditions.

Prerequisites

The candidate should be comfortable with basic mathematics, statistics, probability, EXCEL and some familiarity with basic derivatives pricing.

Target Audience

This course is for practitioners in the finance & accounting fields as well as those valuing employee equity compensation programs.