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
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.
The candidate should be comfortable with basic mathematics, statistics, probability, EXCEL and some familiarity with basic derivatives pricing.
This course is for practitioners in the finance & accounting fields as well as those valuing employee equity compensation programs.