Discount for Lack of Marketability (DLOM) is an adjustment that is needed whenever an ownership interest cannot be quickly converted to cash at or near its fair/appraised value. It is commonly used when valuing minority interests in privately held companies, restricted shares, or other assets that have contractual transfer restrictions.

Typical cases that might require a DLOM calculation include post-vest holding periods, 409A stock option valuations, gift/estate taxes, and shareholder disputes.

One way to calculate a DLOM involves applying option pricing theory to compute the cost of a theoretical put option that protects against a drop in value during the restricted holding period. Examples of option pricing DLOM models include Chaffe, Finnerty, Longstaff, and Ingersoll.

The DLOM calculators at FinCalcs.NET are geared towards evaluating restricted shares and other equity awards with a post-vest holding period (PVHP) requirement. In recent years, PVHP has been getting higher visibility in executive compensation programs as it helps to align long-term incentives between management and shareholders, with a side benefit of resulting discount helping to reduce the compensation expense. A policy update in 2026 by Institutional Shareholder Services (ISS) elevated the standing of time-based equity awards with a combined vesting & holding period of at least five (5) years even if they do not have performance vesting conditions.

Our calculators are based on all the major option-pricing DLOM models. Each model has varying inputs and considerations resulting in different resulting discounts.