Calculator · Option pricing
Option pricing calculator
Option values for valuation work: warrants and employee options with dilution, equity in a distressed firm, patents as American real options, and the option-pricing method (OPM) that allocates equity across share classes.
What the option pricing calculator covers
Plain options, warrants and employee options are priced with Black-Scholes, adjusted for dilution. Equity in a highly levered or distressed firm is valued as a call on the firm's assets. A patent or undeveloped asset is valued as an American call on a binomial tree, with the European value, the static NPV and the value of waiting beside it.
The OPM mode allocates a total equity value across up to six share classes, including preferred shares with liquidation preferences, seniority, participation and caps, common shares and option pools, by the Black-Scholes breakpoint method, or backsolves the equity value from the price of a recent funding round. The implied discount of common shares can then be taken to the DLOM calculator.
Related: DLOM calculator · Distress probability calculator · Equity bridge calculator · Model notes
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