- CFA Exams
- CFA Level I Exam
- Study Session 5. Financial Reporting and Analysis (1)
- Reading 14. Employee Compensation: Post-Employment and Share-Based
- Subject 5. Accounting for Stock-Based Compensation
CFA Practice Question
According to FAS 123 (R), companies are required to value stock options using an option-pricing model. The preferred model is the:
B. Monte Carlo simulation model.
C. Binomial model.
D. There is no preferred option-pricing model.
A. Black-Scholes-Merton model.
B. Monte Carlo simulation model.
C. Binomial model.
D. There is no preferred option-pricing model.
Correct Answer: D
No particular technique is required or preferred.
User Contributed Comments 3
| User | Comment |
|---|---|
| thebkr777 | Contradictory to reading "Fair value was to be estimated using Black-Scholes or binomial option-pricing models." |
| b25331 | Some clarification here, the curriculum states only, that the two models are commonly used, but accounting standards do not prescribe a particular model |
| davidt876 | thanks |