Sally Jameson: Valuing Stock Options in a Compensation Package

Case Solution

Peter Tufano, Michael Lewittes
Harvard Business School ()

It describes a thinly veiled situation facing a recent Harvard MBA graduate who was forced by a potential employer to put a dollar value on stock options. There are two objectives: 1) To serve as an introduction to option pricing, giving students the opportunity to use market data to evaluate an option in a realistic setting. 2) The setting allows for a broader discussion of the wisdom of option reward plans and widespread misconceptions about the value of granting options based on a widespread misunderstanding of how options work and value.

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