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Share-Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation and Related Income Tax Benefit
Total pre-tax expense associated with share-based compensation and its related income tax benefit is shown in the table below. The year over year decrease in expense related to performance units, stock options and restricted stock units and awards is primarily due to modifications to the terms of awards in 2017 (see Equity Award Modifications below) and the prior year expense related to 9 million stock options granted in February 2017 to former President and CEO E. Hunter Harrison which were forfeited upon his death in December 2017.

 
Second Quarters
 
Six Months
(Dollars in millions)
2018
2017
 
2018
2017
 
 
 
 
 
 
Share-Based Compensation Expense:
 
 
 
 
 
Performance Units
$
8

$
18

 
$
14

$
39

Stock Options
2

21

 
6

32

Restricted Stock Units and Awards
2

5

 
3

9

Stock Awards for Directors
—

—

 
2

2

Total Share-Based Compensation Expense
$
12

$
44

 
$
25

$
82

Income Tax Benefit
$
9

$
13

 
$
17

$
29
Schedule of Weighted Average Assumptions
The fair value of these performance units awarded in February 2018 was calculated using a Monte-Carlo simulation model with the following weighted-average assumptions:

 
Six Months
 
2018
Weighted-average assumptions used:
 
Annual dividend yield
1.6
%
Risk-free interest rate
2.3
%
Annualized volatility
29.2
%
Expected life (in years)
2.9
Summary of Fair Value Assumptions for Stock Option Awards
The fair values of all stock option awards during the quarters and six months ended June 30, 2018 and June 30, 2017 were estimated at the grant date with the following weighted average assumptions:
 
Second Quarters
 
Six Months
 
2018
2017
 
2018
2017
Weighted-average grant date fair value
$
17.62

$
12.27

 
$
14.64

$
12.83

 
 
 
 
 
 
Stock options valuation assumptions:
 
 
 
 
 
Annual dividend yield
1.3
%
1.5
%
 
1.5
%
1.5
%
Risk-free interest rate
2.8
%
2.1
%
 
2.6
%
2.2
%
Annualized volatility
25.8
%
27.0
%
 
27.0
%
27.1
%
Expected life (in years)
6.5

6.5

 
6.5

6.3

 
 
 
 
 
 
Other pricing model inputs:
 
 
 
 
 
Weighted-average grant-date market price of CSX stock (strike price)
$
65.44

$
47.80

 
$
54.14

$
49.60