Verigy (VRGY)

Assumptions for Verigy options

The Black-Scholes model requires the use of highly subjective and complex assumptions, including the option’s expected life and the price volatility of the Company’s underlying stock. The price volatility of our stock price was determined on the date of grant using a combination of the average daily historical volatility and the average implied volatility of publicly traded options of our ordinary shares.  Management believes that using a combination of historical and implied volatility is more reflective of market conditions and the most appropriate measure of the expected volatility of our stock price.  Because we have limited historical data, we used data from peer companies to determine our assumptions for the expected option life. For the risk-free interest rate, we used the rate of return on US Treasury Strips as of the grant dates.

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Assumptions for Verigy options

The Black-Scholes model requires the use of highly subjective and complex assumptions, including the option’s expected life and the price volatility of the Company’s underlying stock. The price volatility of our stock price was determined using a combination of the average daily historical volatility and the average implied volatility on the grant date.  Management believes that using a combination of historical and implied volatility is more reflective of market conditions and the most appropriate measure of the expected volatility of our stock price.  Because we have limited historical data, we used data from peer companies to determine our assumptions for the expected option life. For the risk-free interest rate, we used the rate of return on US Treasury Strips as of the grant dates.