Measurement Parameters of the Option Pricing Model
In accordance with IFRS 2 measurement criteria, the SAR were measured by reference to the fair value of the rights as of December 31, 2007.
A recognized option pricing model is used for measuring the value of these options. This option pricing model simulates a large number of different possible developments of the E.ON share price and the benchmark Dow Jones STOXX Utilities Index (Price EUR) (Monte Carlo simulation).
A certain exercise behavior is assumed when determining fair value. Individual exercise rates are defined for each of the tranches, depending on the price performance of the E.ON share. Historical volatility and correlations of the E.ON share price and of the benchmark index that reflect remaining maturities are used in the calculations. The risk-free interest rate used for reference is the zero swap rate for the corresponding remaining maturity. The dividend yields of the E.ON share (2.30 percent) and of the benchmark index (3.18 percent) are also included in the pricing model. The dividend yield used for the E.ON share in the calculations is based on the ratio of the most recent dividend distributed and the share price on the valuation date. Accordingly, as of the balance sheet date, this yield corresponds approximately to the anticipated future dividend yield. The average of the Xetra closing prices for E.ON AG shares was EUR118.08 in 2007. The Xetra closing price for E.ON AG shares at year-end was EUR145.59. The Dow Jones STOXX Utilities Index (Price EUR) closed at 549.75 points.
The following overview contains additional parameters used for measurement:
A recognized option pricing model is used for measuring the value of these options. This option pricing model simulates a large number of different possible developments of the E.ON share price and the benchmark Dow Jones STOXX Utilities Index (Price EUR) (Monte Carlo simulation).
A certain exercise behavior is assumed when determining fair value. Individual exercise rates are defined for each of the tranches, depending on the price performance of the E.ON share. Historical volatility and correlations of the E.ON share price and of the benchmark index that reflect remaining maturities are used in the calculations. The risk-free interest rate used for reference is the zero swap rate for the corresponding remaining maturity. The dividend yields of the E.ON share (2.30 percent) and of the benchmark index (3.18 percent) are also included in the pricing model. The dividend yield used for the E.ON share in the calculations is based on the ratio of the most recent dividend distributed and the share price on the valuation date. Accordingly, as of the balance sheet date, this yield corresponds approximately to the anticipated future dividend yield. The average of the Xetra closing prices for E.ON AG shares was EUR118.08 in 2007. The Xetra closing price for E.ON AG shares at year-end was EUR145.59. The Dow Jones STOXX Utilities Index (Price EUR) closed at 549.75 points.
The following overview contains additional parameters used for measurement:
