Developed in 1979 by Cox, Ross and Rubinstein, the binominal or lattice considers more variables, including vesting periods, changes in price, interest and dividends, forfeiture and early exercise; considered more flexible than the Black-Scholes Model.

Stock options are normally a heavily disputed aspect of any divorce settlement, to the extent that many property awards are appealed through the court and re-opened to consider this type of employment compensation. Each expert has his or her own way to determine the value of options, and of course they must be classified just like any other asset. Are they separate or marital? Or what portion should be considered marital?

Often times the reason why the spouse was awarded the options will help with the classification process. For example, options can be awarded as an incentive to take employment or as a form of bonus. This being said, if the options were awarded to a spouse to take employment at a job prior to getting married, the options more likely would not be considered marital. If the options are a form of compensation during the marriage, then they should be valued and dividing accordingly.

See Valuation. Compare Black-Scholes.

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1. Stock Options as a Form of Compensation
   Here is something to consider. If an employee is given options that can be vested only after 5 years of employment, and the value of the company stock rises significantly over the five years, the likely hood of the employee getting and increase in salary is minimal. This being said, often times stock options can sabotage the opportunity to get a salary increase, therefore this aspect should be considered especially if the options are far from being vested.
   Contributed on 5/17/2007 by: DivorceDex.com Staff

   Category: Property Valuations  (Applicable in All States)

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