This GAAP charge was based on the Black Scholes valuationmethod, often maligned for being subjective and inappropriate for shares and options generally held for a long period of time.
Of the three approaches, methods 1 and 3, using currency shares and empirics respectively to adjust for currency valuation effects, result in robust relationships between changes in currency-adjusted FX reserves and the BOP surplus, whereas method 2 using forex purchases as an alternative proxy for adjusted FX reserves is inferior.