Experian 2010 Annual Report Download - page 134
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Experian Annual Report 2010 Financial statements132
Notes to the Group nancial statements (continued)
29. Share-based payment arrangements (continued)
(ii) Information relating to option valuation techniques
For the above plans the Black-Scholes model is used to determine an appropriate value of the option grants and inputs into the
model are calculated as follows:
Expected volatility
– Calculated as an average over the expected life with an assumption made for volatility in each year of the
expected life. Volatility in the rst year is assumed to be the same as implied volatility on grant date. Volatility for year 4 and
beyond is assumed to remain at the long run historic volatility. Linear interpolation is assumed for years 2 and 3.
Expected dividend yield
– Yields are based on the current consensus analyst forecast gures at the time of grant. The inputs
utilised are an average of the forecast over the next three nancial years.
Risk-free rate
– Rates are obtained from the UK Government Debt Management Ofce website which details historical prices
and yields for gilt strips.
Expected option life to exercise
– Options under the Experian Share Option Plan vest after 3 years or 4 years. The expected life
is 4 years for the options that vest after 3 years and 4.85 years for the options that vest after 4 years. Options under the Experian
Sharesave Plans have expected lives of either 3 or 5 years.
Share price on grant date
– The closing price on the day the options were granted.
Option exercise price –
Exercise price as stated in the terms of each award.
(iii) Weighted average estimated fair values and the inputs into the Black-Scholes models
Arrangements Experian Share Option Plan Experian Sharesave Plans
2010 2009 2010 2009
Share price on grant date (£) 4.66 3.29 4.39 3.65
Exercise price (£) 4.66 3.29 3.51 2.91
Expected volatility 39.6% 45.2% 40.8% 36.0%
Expected dividend yield 2.7% 3.8% 2.8% 3.0%
Risk-free rate 2.9% 3.1% 3.2% 5.1%
Expected option life to exercise 4 years 3.5 years 3.8 years 3.8 years
Fair value (£) 1.30 0.92 1.54 1.26