AIG 2012 Annual Report Download - page 336
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.....................................................................................................................................................................................
Stock Appreciation Rights Valuation
..............................................................................................................................................................................................
We use a Monte Carlo simulation approach, which incorporates a range of input parameters that is consistently
applied, to determine the fair value of SARs awards at each reporting period. The table below presents the
assumptions used to estimate the fair value of SARs on December 31, 2012.
Expected dividend yield(a) –%
Expected volatility(b) 33.78 - 40.57%
Weighted-average volatility 37.64%
Risk-free interest rate(c) 0.34 - 0.40%
Expected term(d) 1.0 - 2.0 years
(a) The dividend yield is estimated at zero percent given our recent dividend history. See Note 17 herein for additional information.
(b) The expected volatilities are the implied volatilities with the nearest maturity and strike price as of valuation date from actively traded stock
options on AIG Common Stock.
(c) The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and maturity date that is
assumed to be constant and equal to the interpolated value between the closest data points on the USD LIBOR-Swap curve as of valuation date.
(d) The term to maturity is specified in the contract of each SARs grant.
..................................................................................................................................................................................................................................
AIG 2012 Form 10-K 319
2012
ITEM 8 / NOTE 21. SHARE-BASED COMPENSATION AND OTHER PLANS