Participants should possess a basic understanding of option pricing concepts, including the binomial model and the Black-Scholes model, prior to attending this workshop.

How do market and non-market factors influence the valuation of financial instruments? Which models are essential for assessing employee stock options, convertible bonds, and preference shares?

Through this workshop, participants will gain the requisite skills to value employee stock options, convertible bonds, and preference shares using key models such as Hull-White, Black-Scholes, and PWERM-OPM. They will analyse the factors affecting these valuations, integrate financial instruments into equity allocation, and perform validation checks to ensure accuracy.

At the end of this course, you will be able to:

1. Recognise key market and non-market factors that influence ESO valuation.
2. Understand the valuation approaches for convertible bonds and preference shares.
3. Appreciate how ESOs and convertible bonds are integrated into equity allocation.
4. Gain familiarity with key valuation models, including Hull-White, Black-Scholes, and PWERM-OPM.

Programme Outline

Valuation of employee stock options (“ESO”) under FRS 102 Share-based Payment

• Analysing market and non-market factors affecting the valuation of ESO.
• Applying the Hull-White binomial option pricing model to value ESO.
• Practical application 1: Valuing ESO using the generic Hull-White binomial option pricing model.
• Practical application 2: Valuing ESO using the Black-Scholes Model.

Valuation of convertible bonds under FRS 109 Financial Instruments and FRS 39 Financial Instruments: Recognition and Measurement

• Practical application 3: Applying binomial option pricing model in the valuation of convertible bond.
• Practical application 4: Applying the discounted cash flow method in the valuation of the host debt instrument.

Valuation of preference share under FRS 109 Financial Instruments and FRS 39 Financial Instruments: Recognition and Measurement

• Preference vs. ordinary shares
• Concept of total equity value and “equity allocation”.
• Applying the PWERM-OPM hybrid model and the back-solve-and-calibration method.
• Practical application 5: Determining the “breakpoint” for various classes of preference shares and ordinary shares

Valuation of financial instruments in the presence of preference shares

• Including ESO and convertible bond in the equity allocation process
• Iterative calculation using the PWERM-OPM hybrid model.
   

Training Methodology*

Intended For

This intermediate to advanced-level course is designed for auditors, CFOs, financial controllers, finance managers, as well as professionals in valuation or those seeking to deepen their understanding of valuation.

Programme Facilitator(s)