7. STOCK COMPENSATION PLANS

As of September 30, 2018, the Company’s primary type of stock-based compensation was restricted stock units and stock options. Stock-based compensation expense for the following periods were:



In millions	Three months ended September 30				Nine months ended September 30
In millions	2018		2017		2018			2017
Restricted stock units	$	13	$	18	$	50		$	57
Stock options	1		—		2			—
Employee stock purchase plan	1		1		3			3
Stock-based compensation expense	15		19		55			60
Tax benefit	—		(9)		(7		)	(21		)
Total stock-based compensation expense (net of tax)	$	15	$	10	$	48		$	39

Stock-based compensation expense is recognized in the financial statements based upon grant date fair value. During the nine months ended September 30, 2018, the Company granted stock options and the weighted average fair value of option grants was estimated based on the below weighted average assumptions, which was $9.80 for the nine months ended September 30, 2018. During the nine months ended September 30, 2017 the Company did not grant any stock options.



	Nine months ended September 30, 2018
Dividend yield	$	—
Risk-free interest rate	2.50		%
Expected volatility	34.88		%
Expected holding period (years)	3.8

Expected volatility is calculated as the historical volatility of the Company’s stock over a period equal to the expected term of the options, as management believes this is the best representation of prospective trends. The Company uses historical data to estimate option exercise and employee terminations within the valuation model. The expected holding period represents the period of time that options are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on a blend of the three and five-year U.S. Treasury yield curve in effect at the time of grant.

As of September 30, 2018, the total unrecognized compensation cost of $92 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately 1.0 year. As of September 30, 2018, the total unrecognized compensation cost of $18 million related to unvested stock option grants is expected to be recognized over a weighted average period of approximately 1.9 years.

Employee Stock Purchase Plan The Company's Employee Stock Purchase Plan ("ESPP") provides employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation.

For the three months ended September 30, 2018, employees purchased 0.2 million shares, at a discounted price of $25.59. For the three months ended September 30, 2017, employees purchased 0.2 million shares, at a discounted price of $34.57