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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.03

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Dec 24 12:59 PM EST

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To: hueyone who wrote (62909)	2/5/2003 8:17:39 AM
From: RetiredNow	Read Replies (2) of 77400

Hueyone, all the CPAs and finance folks out there know and were taught that Black Scholes is flawed. The problem is very simply that it distorts expenses to the upside in bull market years and underestimates expenses in bear years. That's why I keep saying an adjusted system should be used where you true up the Black Scholes expense every quarter and then when the option either expires or is exercised. That would smooth out the costs. Otherwise, you get an out of whack situation like Cisco had where they would have expense billions in stock options expenses in the bull years, only to find out that very little of those expenses would ever be realized by stock options exercise, because a good chunk were to become worthless when the prolonged bear market ensued.

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