Informatics Solutions
Volatility Informatics
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.
Custom Stock Price Volatility Studies
Volatility Informatics
Contact us for your custom Volatility Survey of U.S. community banks which has been widely recognized as a trusted resource for bank CFO's and CPA's since 2007.
Each Volatility Survey contains a select group of peer banks with narrative and supporting data. Surveys are consistently and objectively prepared based on the following standardized methodology:
- Large money center or super regional institutions are excluded from the Surveys since they can significantly influence Survey results.
- Due to the anticipated use of the Survey information by community financial institutions, and the desire to "level the playing field" for small institutions, no asset size or market capitalization weighting is used to calculate the Survey averages.
- Volatility calculations are derived from historical split-adjusted stock price data updated through each Survey cut-off date.
- Financial institutions included in the Surveys must have had readily accessible historical "adjusted" stock prices - either traded on a recognized exchange or consistently listed over the counter.
- A six-year historical data span is included in each Survey. Many of the sampled institutions have historical stock price data covering the full six years while others may have a shorter period due to recent market listings (IPO's) or de novo status.
- All volatility results are included in the Surveys to provide the reader with the complete list of all institutions with the corresponding financial information for determination of the relevancy to their own circumstances.
- The average data span for all institutions sampled is in excess of five years and for volatility formula calculations daily, weekly, and monthly stock price information is provided. The exhibits attached to the Surveys indicate the span of historical data available for each institution.
- Volatility data is provided in three distinct data samples: Daily, Weekly, and Monthly to simulate your institution's trading volume and activity.