Table:
|  | 2019 | 2018 |
| --- | --- | --- |
| Weighted average share price (pence) | 163.1 | 112.9 |
| Weighted average exercise price (pence) | 0.0 | 0.0 |
| Weighted average fair value (pence) | 141.1 | 95.1 |
| Expected volatility (%) | 31.6–32.8 | 30.6 |
| Option life (years): |  |  |
| – Performance Shares | 3.0 | 3.0 |
| – Options and SARs | 10.0 | 10.0 |
| Risk free rate (%) | 0.48-0.72 | 0.88 |
| Dividend yield (%) | 2.5–3.0 | 3.0 |
Paragraphs:
34. Share-based payment continued
3.8 million share incentives were granted during 2019 (2018 2.7 million). The fair value of share incentives has been estimated as at the date of grant using the Black-Scholes binomial model. The following table gives the assumptions made in arriving at the share-based payment charge and the fair value:
The expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two years which management considers to be the period which is likely to be most representative of future volatility. The risk free rate is calculated by reference to UK government bonds.
Question:
How is the fair value of share incentives estimated?
Answer: at the date of grant using the Black-Scholes binomial model