Relative TSR PSU: what it costs to book, and what it will likely pay

Hypothetical plan for Chipotle against its 16 disclosed pay peers. Prices through 2026-09-18. 100,000 simulated three-year futures. Generated 2026-09-19.

$44.97

Grant-date fair value per target share
135% of the $33.43 stock price

29%

of futures pay zero

49%

pay target or better

27%

pay the maximum

Three checks before trusting any of it

PASS Discounted expected price equals spot less dividends
PASS Award paying target at every rank is worth one share
PASS Company identical to peers ranks at the 50th percentile

Two questions, two answers

What it costs to book
Fair value run, risk-free growth.
Expected payout 96.6%
Median 3-yr TSR -3.9%

What it will likely pay
Forecast run, 8% growth (assumed).
Expected payout 98.1%
Median 3-yr TSR +5.6%

The odds of zero are 28.8% in both. Rank only cares about relative performance. What changes is whether the executive also made money.

One assumption removed

Pretend the peers don't move together and fair value becomes $47.39, +5.4%. Same error as treating tournament games as independent coin flips.

What is random in this model

17 correlated stock paths per future: Chipotle plus 16 peers, each with its own measured volatility and dividend yield.
136 pairwise correlations, measured from three years of daily returns. Peers that move together hold Chipotle's rank steady; peers that don't make it noisy.
100,000 futures, each three years long, each ending in a 20-day price average for all 17 names.
171 parameters estimated from the price file. Zero of them typed in by hand.

Ranking is the hard part. There is no formula for where one stock lands among sixteen correlated others; you have to play the future out and count. That is why this is a simulation and not a spreadsheet.

What was measured, what came from the plan, what was assumed

Stock price	$33.43	measured
Chipotle volatility	35.4%	measured
Peer volatility, median	31.3%	measured
Correlation to peers, mean	0.28	measured
Dividend yields	17 of 17 tickers	measured
Risk-free rate	4.83%	measured
Payout curve, cap, averaging	from plan_terms.md	plan
Real-world return	8.0%	ASSUMED

Assumptions I made that you did not give me

Beginning price. Used the latest close as the starting price instead of a 20-day trailing average.
Percentile method. Share of the sixteen peers Chipotle outranks. Other conventions exist and move a near-miss across the threshold.
Calibration window. Trailing 3 years of daily returns for volatility and correlation, matched to the performance period.
Dividend reinvestment. Treated as continuous at the trailing yield rather than reinvested on each ex-date.
Dividend equivalents. None assumed on the award itself.
Risk-free rate. 3-year Treasury par yield used as the continuously compounded rate. Basis-point difference.
Volatility source. Historical only. Implied volatility not used.
Real-world return. 8.0% for every stock in the forecast run. Assumed, not measured. Not used for fair value.
Simulation count. 100,000 paths. Standard error on fair value about $0.34 at 95% confidence.

Demonstration of method on public data. Not a valuation for financial reporting; a valuation firm validates and signs the version you would file. Chipotle's actual 2025 PSU is an operating-metric award with a relative TSR cap against the S&P 500; the negative-TSR cap and the peer-group ranking here are features of the hypothetical design.