Can Vesting Schedules Be Modeled Using Black-Scholes Principles?
While the Black-Scholes model is primarily for pricing European-style options on non-dividend-paying stocks, its principles (volatility, time, interest rates) can conceptually inform the valuation of unvested tokens, especially those resembling employee stock options. However, the unique illiquidity, governance rights, and non-standard vesting/cliff structures of crypto tokens require significant modification to the standard model.
Glossar
Vesting Schedules
Schedule ⎊ Vesting Schedules dictate the timeline over which allocated tokens, typically those reserved for founders, team members, or early investors, are gradually unlocked and become transferable on the blockchain network.
The Black-Scholes Model
Foundation ⎊ The Black-Scholes model serves as the cornerstone for modern options pricing theory, providing a continuous-time framework for calculating the fair value of derivatives.