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Share-Based Compensation (Tables)
 9 Months Ended
Sep. 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 third quarter share-based compensation expense is primarily due to 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. Additionally, the decrease in nine months expense was also due to modifications to the terms of awards in the first and second quarters of 2017 (see Equity Award Modifications below).

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

$
3

 
$
22

$
41

Stock Options
4

14

 
10

47

Restricted Stock Units and Awards
1

2

 
4

11

Stock Awards for Directors
—

—

 
2

2

Total Share-Based Compensation Expense
$
13

$
19

 
$
38

$
101

Income Tax Benefit
$
6

$
12

 
$
23

$
41
Schedule of Weighted Average Assumptions
The fair value of the performance units awarded during the quarter and nine months ended September 30, 2018 was calculated using a Monte-Carlo simulation model with the following weighted-average assumptions:

 
Third Quarter
 
Nine Months
 
2018
 
2018
Weighted-average assumptions used:
 
 
 
Annual dividend yield
1.2
%
 
1.6
%
Risk-free interest rate
2.7
%
 
2.3
%
Annualized volatility
27.9
%
 
29.1
%
Expected life (in years)
2.3

 
2.9
Summary of Fair Value Assumptions for Stock Option Awards
The fair values of all stock option awards during the quarter and nine months ended September 30, 2018 and September 30, 2017 were estimated at the grant date with the following weighted average assumptions:
 
Third Quarters
 
Nine Months
 
2018
2017
 
2018
2017
Weighted-average grant date fair value
$
20.52

$
—

 
$
14.65

$
12.83

 
 
 
 
 
 
Stock options valuation assumptions:
 
 
 
 
 
Annual dividend yield
1.2
%
—
%
 
1.5
%
1.5
%
Risk-free interest rate
2.8
%
—
%
 
2.6
%
2.2
%
Annualized volatility
25.5
%
—
%
 
27.0
%
27.1
%
Expected life (in years)
6.5

—

 
6.5

6.3

 
 
 
 
 
 
Other pricing model inputs:
 
 
 
 
 
Weighted-average grant-date market price of CSX stock (strike price)
$
74.84

$
—

 
$
54.19

$
49.60