Improving Estimates of Volatility for Private Companies

Putting a price on volatility

Expected volatility is one of the central assumptions when valuing equity and equity derivatives.

Valuation practices for estimating volatility in private companies have evolved over the last several years, especially alongside the introduction of valuation guides.

In addition to gaining knowledge on volatility valuation best practices, webcast attendees will:

• Assess methods to quantitatively adjust volatility for size differences.
• Assess the relationship between volatility and the discount rate.
• Determine private company to public equity volatility transition.
• Learn more about implied volatility weighting.
• Recognize series volatility and ASC 718 implications.

Key Topics

• Quantitative adjustment for size
• Analysis of the ratio of expected volatility to discount rate
• Consideration of one-time events (life science industry)
• Private company to public entity transition - Implied volatility weighting - Series volatility and ASC 718 implications

Learning Outcomes

• Recognize factors unique to estimating volatility of private and early-stage companies.
• Determine situations where the quantitative volatility size adjustment approach may be necessary.
• Recognize volatility calculation approaches in transitions from private to public entity.
• Identify implications for using series volatility.

Who Will Benefit

• Valuation professionals who estimate volatility as one of the inputs in the valuation analysis
• Auditors who review valuation of options and warrants where volatility assumption is being used
• CFOs and controllers of private companies responsible for reviewing valuation reports