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To: Lizzie Tudor who wrote (61169)	8/29/2002 7:52:12 PM
From: rkral	Respond to of 77400

OT ... Lizzie, "You can now add Coke ... " Yes. As of today there are fifty S&P 500 companies that either are, or have announced they will be, expensing options. Quite a change from the two at the beginning of June. spglobal.com Of course each of these use a different method to estimate, and are not constrained in any way to go with Black Scholes ... I believe that is an exaggeration. FAS 123 explicitly says that "the fair value of a stock option shall be estimated using an option-pricing model (for example, the Black-Scholes or a binomial model) ... ". stores.yahoo.com Now how many other acceptable option-pricing models do you think there are? I know of no others. And the B-S and binomial models yield essentially the same numbers .. slightly different only for dividend-paying stock. So IMO it is safe to assume, for all practical purposes, that everyone will be using the Black-Scholes model (or the similar binomial model). But KO is different you say? Not really. They are just putting the onus of evaluation on at least two financial institutions. You and I can safely bet these financial institutions will also use the B-S model (or the similar binomial model). KO's intent is that these evaluations be binding, that is, if KO thinks the evaluation is wrong, KO can take an opposing market position with the financial institution. www2.coca-cola.com (I don't know for sure, but I think KO can either take the position of a covered-call writer or a call buyer. My bet -- KO will NEVER take that opposing position. Imagine the shareholder screaming if KO loses a bundle doing either.) Of course, this position will only be advantageous to KO if KO is right .. and lucky. After all, options is a zero-sum game .. and you only get a $0 result over a large number of positions (samples). It's like if you flip a coin two million times .. you'll get close to a million heads .. and a million tails .. or at least very close to 50% heads. But how many years is it going to take to get close to 50% when you only flip the coin once a year? ... it appears that Warren Buffet at least isn't interested in Black Scholes based on the approach at Coca Cola. Incorrect IMO, based on the above. Ron