The Black Scholes equation is one of the most widely recognized methods used to value employee stock options in publicly traded and privately owned companies.  It is frequently the basis for determining fair value in financial reporting for equity compensation (share based payments) under ASC 718 (f/k/a 123R) and the recognition of the corresponding income statement expense and balance sheet liability.

This course teaches you how to use Black Scholes to value employee stock options in any company.  You will gain a basic knowledge of stock options and how Black Scholes works. You will learn how to correctly determine the key inputs required in the equation based on professionally recognized methods and best practices. 

The focus of this course is on how to use the equation, not the complex Nobel prize-winning mathematics behind it. With the information provided in this course, you will be able to successfully run Black Scholes on various software platforms, Microsoft Excel™ spreadsheets, or other specialized calculators. As a bonus, a Microsoft Excel™ based worksheet template for the Black Scholes equation will be included for course participants.

We begin with a summary of the basic concepts and economic theory relating to employee stock options. We provide you with a simplified explanation of how the math in the Black Scholes equation actually works. We then show you how to determine basic inputs to the equation: current price, exercise (strike price), risk free rate, and dividends. We then explain how to determine some of the key assumptions used in the equation relating to the expected term and volatility. This includes a discussion of how traditional inputs to Black Scholes must be modified for use with employee stock options. We then review how changes in key variables affect the value determined using Black Scholes. We describe common errors in the use of the equation and provide suggestions to help your audit, review, or documentation process run smoothly. The course wraps up with a short comparison of Black Scholes to other valuation methods for employee stock options.

This course is for financial professionals who may be new to or want to better understand the Black Scholes equation and its use to value stock options issued as equity compensation. The information in this course can help individuals who assemble data/inputs, run calculations, perform reviews, handle communications, or present results based on the Black Scholes equation. 

Learning Objectives
  • Explore the background and uses of Black Scholes.
  • Discover a practical understanding of the concept and theory behind the equation.
  • Discover best practices and professionally recognized methods to determine all variables used in the equation.
  • Identify potential mistakes and errors that may occur in the use of the equation.
  • Explore how Black Scholes compares to other methods used to value employee stock options. 
Last updated/reviewed: August 10, 2023
13 Reviews (58 ratings)


Member's Profile
Excellent coverage of a subject that can appear rather complex to the uninitiated. I appreciated the methodical, measured approach as we walked through the material. Includes supplementary readings and a Black Scholes calculator as well! As a recently formed ESOP, my company is working through the joy of valuing synthetic equity instruments, so courses like this are most helpful!

Anonymous Author
Excellent course! The instructor did an outstanding job of explaining the concepts. I especially liked the 30,000 feet presentation. I would be very interested in taking other courses from this instructor. He has a gift for explaining a difficult subject and making it simple for the average person.

Member's Profile
The course was presented in a very great way. The introduction and review of basic finance concepts really sets up the participant to understand the equation. I also liked the shout out to Merton since he often is overlooked.

Anonymous Author
Great discussion of the Black Scholes model. The Excel file is very useful, however, no formulas are shown. The file is protected. It would be great if we can see the formulas.

Member's Profile
Presented the topic in a very understandable way and in a manageable amount of time. The supplemental materials are a great feature.

Anonymous Author
loved this course. i will use this course to help come up with an internal policy to value stock options

Anonymous Author
This course provides a good look at the inputs into the Black Scholes method and how they are used.

Member's Profile
Excellent summary of Black Scholes. This course presented a thorough overview of this model.

Anonymous Author
It was interesting and the slides were useful in coming back to the topics.

Member's Profile
Good course to understand the basic concept of Black Scholes.

Anonymous Author
Solid introduction to an potentially complex subject

Member's Profile
would like more mathematical examples using BSM.

Member's Profile
Good course!

Course Complexity: Intermediate

No Advanced Preparation is required.

Basic knowledge of math and key finance concepts are recommended for this course. 

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Questions and Answers(2 Questions)
User picture

Are you able to provide access, password to unprotect template worksheet?

Member's Profile

Hi - the sample excel is set up as an example for this specific purpose of the course, so to prevent inadvertent changes it the formulas are locked so it will work correctly. I don't recommend unlocking the worksheet as it may not function properly. Please contact me if you need more information or assistance.

Instructor for this course
Course Syllabus
  Introduction to Black Scholes Basics1:50
Background, Theory, and Concepts
  Review Finance Theory11:43
  Black Scholes Concepts and Principles 9:46
The Equation
  The Black Scholes Equation 9:37
  The Black Scholes Equation (Continued)11:05
Problem Solving
  Issues, Solutions, Alternatives 10:49
  Other Methods to Value Stock Options 8:53
  Course Summary0:45
  Slides: Black Scholes Basics and BeyondPDF
  Black Scholes Basics and Beyond Glossary/IndexPDF
  Sample Black Scholes Employee Stock Option CalculatorXLSX