Expected stock price volatility is just one of six Black-Scholes model assumptions used for FAS 123R / ASC 718 Equity Grant Compensation Cost Calculations. But it is one of the more important and subjective model assumptions.
Each financial institution is required to analyze historical stock price data, or peer data - coupled with a reasonableness evaluation which considers whether their historical trends will continue for a future period covering the expected life of any new option grant.
Therefore, it is important, not to merely use an institution's historical volatility as the Expected Volatility. Other factors should be considered which may lead to a different conclusion regarding the future stock price performance.
FASB encourages companies to evaluate their historical stock price data and "other factors" to arrive at an expected stock price volatility. However, FASB states "this statement does not specify a method of estimating expected volatility; rather it provides a list of factors which should be considered in estimating expected volatility. An entity's estimate of expected volatility should be reasonable and supportable."
As part of the subjective process, even public companies might wish to examine our peer volatility information to obtain further confirmation of their expected volatility assumptions.
Data Informatics, LLC
Click here to download a Complimentary 14 page Executive Summary of our recent Community Bank Volatility Survey.
"I am thrilled that I discovered Volatility Informatics' Community Bank studies. Your data provides the ability to easily create community bank peer groups to document our Black Scholes Expected Volatility assumption since we do not have enough trading history of our own. It is a terrific source and much better than our previous methodology."
- Chief Financial Officer, denovo community bank, California
"We are an established community bank with low stock trading trading volume. Volatility Informatics' Community Bank Studies provide us with objective data to test and augment our own stock price volatility calculations. In these turbulent times, it is a great tool to see other banks' Stock Price Volatilies."
- Chief Financial Officer, established community bank, Florida
"Volatility Informatics has proven to be an objective source for our firm in validating our clients' Black Scholes stock price volatility assumptions; and a great educational tool for our staff and clients."
- Audit Partner, southeastern CPA firm
The March 31, 2018 Quarterly Stock Price Volatility Survey is now available. This issue represents our forty-third consecutive quarterly Survey of U.S. community banks and has been widely recognized as a trusted source for bank CFO's and CPA's since 2007.
Each Quarterly Survey contains approximately 180 pages of narrative and supplemental data covering approximately 800 exchange traded financial institutions. The surveys have been consistently and objectively prepared each quarter based on the following standardized methodology:
Each survey contains a twelve page Executive Summary discussing the concept of Stock Price Volatility and the nuances for private banks, thinly traded stocks and de novo institutions.
For a complementary copy of the most recent Executive Summary, please click here.
To purchase a complete survey (approximately 180 pages) with all supporting bank data, please use order form at the top of this page.