European style fixed strike, lookback, and asian put option models have been proposed and utilized by business valuation practitioners to estimate discounts for lack of marketability. Another form of put option, a shout put or shout floor option, more closely mimics marketability than do the previously mentioned forms of put option because both marketability and a shout put option give a stockholder the right to lock in a selling price (the prevailing marketable stock price) for the stock at any point in time over the term of the option. By comparison, over the term of the option the European fixed strike put gives the stockholder the right to lock in a selling price equal to the current stock price; the lookback put gives the stockholder the right to lock in a selling price equal to the highest stock price achieved; and the asian put gives the stockholder the right to lock in a selling price equal to the average of all stock prices achieved. Because the shout put option more closely mimics marketability than do the alternative put option models, it would be a valuable addition to every valuation practitioner's toolbox.
Copyright American Society of Appraisers
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