0
$\begingroup$

This may be a simple question but I wonder if Im oversimplifying it. I'm trying to decide how to value different Stock Employee compensations and in particular a Stock Appreciation Rights (SAR) Reward. A good definition is provided here. Assuming I am modeling the Stock Option prices via a standard Black Scholes framework, with continuous constant dividends, can I just use the same framework to model the SAR, except taking the Strike Price as 0? I assume no turnover or intervening event.

Thanks

Edit: Strike Price should be the stock price at the time of granting and not 0.

$\endgroup$
  • $\begingroup$ The Strike Price of a SAR is not zero, but whatever the stock price was when the SAR was granted. $\endgroup$ – Alex C Dec 20 '18 at 18:57
  • $\begingroup$ @AlexC Sorry, yes. I will make that edit. Would using the standard Black Scholes Option price formulation with this different Strike Price make sense or are there other changes that I am not taking into account as compared to a Stock Option? Thanks $\endgroup$ – Jojo Dec 20 '18 at 19:11
  • 1
    $\begingroup$ From a quant point of view this SAR is just like a call option. $\endgroup$ – Alex C Dec 20 '18 at 19:49

Your Answer

By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service, privacy policy and cookie policy, and that your continued use of the website is subject to these policies.

Browse other questions tagged or ask your own question.