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.


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

  • $\begingroup$ 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

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