The process of determining the price - the value - of an asset.

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9 views

What's the price per share (venture capital)? [on hold]

Let's imagine that I invested 16 000 dollars in my own business start-up. Simultaneously I convinced my two friends to invest 16 000 dollars: Alex (10 000 dollars in 2500 shares) and Zex (6 000 ...
0
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2answers
15 views

How can you find change in working capital and capital expenditures without a balance sheet?

I'm working with the following information trying to work through a valuation exercise and I'm absolutely stuck. How can I find ∆WC and CAPX with this information?
1
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1answer
41 views

Non-contractual accounts behavioural study

I need to carry a non-contractual accounts behavoiural study for a bank. The objective is to estimate core/non core ratios and then bucket and ftp them. Any recipe where to start? I have 3yrs of ...
0
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1answer
22 views

Pricing foreign currency bonds - which approach is more theoretically “sound”?

You own a fixed rate corporate bond in foreign currency (let's say JPY). Your domestic currency is USD. Which of the these two approaches do you consider theoretically better? Discount JPY cash ...
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14 views

The equivalence of APV and WACC

How would you prove the equivalence of APV and WACC (for a firm with constant D/E ratio)?
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1answer
104 views

Complicated American style option contract with numerous non-standard features (simultanous exercise, additional premium, etc.)

I want to value the following contract for times $0<t<T$, i.e. determine $V(t,\cdot)$ where $\cdot$ refers to all other dependences (strike, spot, volatility, etc.). The contract is long and ...
1
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1answer
24 views

How to value pricing and ratings? How to quantify best value? [closed]

I'm trying to define which hotel offers the best value. Let's say we have two hotels - A and B. For A, you pay $10 a night and the rating for the hotel is 9.8. For B, you pay $8 a night and the ...
0
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1answer
66 views

Stock valuation/stock pitch and CAPM

If you were valuing a stock (say to pitch a stock for the buy side), you are looking for stocks that the market has mispriced. Your aim is to have a profitable long or short strategy. Can you use the ...
3
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2answers
46 views

Swap rate calculation if reference rate differs from risk free rates

I want to find a swap rate, for an IRS where the floating is Libor+x bp where x is a constant. I have a risk free curve which is not the libor curve. I also have the libor rates. How can I calculate ...
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20 views

How would MTM an interest only currency swap affect its valuation?

Not sure how a central clearing house that marks an interest only currency swap between two parties to market everyday would effect the currency swap's price. Any ideas?
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0answers
79 views

Mark-to-market cross currency basis swap

Given everything is the same we have a cross currency basis swap (non MTM) and another which is MTM. Should the PV of both swaps be the same and why ? Consider the case when there is no counterparty ...
3
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1answer
99 views

Something is wrong with my MtM calculation

I'm trying to value a super simple receiver swap immediately after the first swap settlement (1 year in). The given answer is -1.91 million to the floating rate payer, but I am not coming up with ...
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2answers
36 views

Value of a continuous cash flow until a random time

I am trying to compute the present value of a continuous cash flow that lasts until a random time. The rate of the cash flow is denoted by $c$ and the random time is denoted by $\tau$. Then my claim ...
0
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0answers
21 views

How to price a reversion?

A reversion is the right to exclusive possession of a property after a specified date (‘reversion date’). Assume no ground rent is payable. Its complement is a leasehold, the right to exclusive ...
3
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1answer
62 views

Discounting dividends and terminal value in valuation

I am new to finance and valuation in particular. I have a query regarding discounting dividends and terminal value for valuation using dividend discount model. I have created an illustration to help ...
12
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3answers
498 views

How are prices calculated for commercial/residential mortgage-backed securities?

What is the theoretical/mathematical basis for the valuation of [C]MBS and other structured finance products? Is the methodology mostly consistent across different products?
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1answer
29 views

Is the equity value of the firm “in the money” or “out of the money”? BOPM & BSOPM [closed]

Value of the firm V = 100 Face value of debt X is 120 and still one year to go until maturity Firm value volatility is 40.5% per annum Risk free rate is 6% Consider a one-period model. If any ...
3
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1answer
174 views

How can one value a Bermuda option?

A Bermuda option allows early exercise at predefined dates, e.g. at maturity equal to $t_1$, $t_2$, $t_3$,...; hence , would its value be the sum of 3 discounted European options with 1-year ...
3
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0answers
96 views

Yield for valuation of illiquid corporate bond

I am trying to value a illiquid corporate bond issued at a discount to face value by a privately held company in India. The corporate bond is a sinkable bond (amortizing principle) with coupon rate of ...
3
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2answers
3k views

Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades

We have built an algorithmic trading software and need to calculate the following parameters for each position in our portfolio. Average Price Cost Realized Profit & Loss Unrealized Profit & ...
2
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1answer
379 views

Using FX ATM/RR/BF Volatility to Estimate Smile

Suppose $S$ is some FX rate, EUR/USD say, and $\sigma_{S}(K,T)$ is the implied volatility for some option written on $S$, sourced from the surface $\sigma_{S}(\cdot,\cdot)$ (alternatively, consider ...
0
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2answers
177 views

Pricing a call when minimum stock price above strike with certainty

I am editing this question because it was originally unclear, and I didn't get the answers I was hoping for. In my finance book I have the following question T-bills currently yield 5.5 percent. ...
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1answer
172 views

Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features

Suppose you have a lease agreement where the functional/domestic currency is RUB and the currency on which the lease is written USD. Let $S$ be the USD/RUB exchange rate (# of rubles per 1 dollar). ...
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47 views

Please recommend a book regarding Monte Carlo simulation in OAS

I couldn't find a book that explains in details how to use Monte Carlo Simulation to generate a number of interest rate scenarios. And then based on the interest rate scenarios, how to calculate the ...
12
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2answers
2k views

What are some quantitative approaches to value investment?

As a developer and statistician, I consider value investing to be a statistically sound investment strategy. I've read a few books on the area but I am still not clear on valuation measures. So I ...
6
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1answer
109 views

Valuing a warrant on a warrant

How would you go about valuing a European warrant that entitles you to a) 1 share of a company and 2) 1 warrant on that same company?
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4answers
7k views

Rationale for OIS discounting for collateralized derivatives?

Can someone explain to me the rationale for why the market may be moving towards OIS discounting for fully collateralized derivatives?
4
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2answers
389 views

Why is USD LIBOR used for USD denominated securities?

I am just starting on Interest Rate Swaps & curve construction. While reading few materials on Interest Rate Swap, it's indicated for e.g. "Floating Coupon Index: 6 month USD LIBOR". LIBOR is ...
3
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1answer
193 views

Valuation of Cox-Ross-Rubinstein Model

We have a Cox-Ross-Rubinstein model with parameters $u$ ("up"), $d$ ("down") , $r$ (interest rate) and $q$ (equivalent martingale probability) $(q=(1+r-d)(u-d)^{-1})$ . We have a contingent claim with ...
2
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1answer
178 views

Best practice approach for calculating the PE-ratio

I am trying to calculate the historical PE ratios of a stock, but which date should I use to get the stock price in calculating the PE ratio? My current approach is to use the stock price of a day ...
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60 views

swaps valuation

I am asked to solve the marking to market value(MtM) of a swap, unfortunely i´m having big troubles finding the solution, it´s a 5.5% (vs. LIBOR) 10-year swap, The notional is 500 mio USD and LIBOR ...
3
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0answers
86 views

How is the redemption right on delisting of underlying shares held by holder in the convertible bond valued?

As title, If there is no delisting constraint, then I can treat the redemption right as the put right on the convertible bond. If there is redemption right on delisting, what is the conventional ...
2
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118 views

Best method for determining the market value of a stock before it is issued

I am attempting to determine the hypothetical market value of a stock for a company emerging from bankruptcy as of a date prior to actual the issuance of the stock. For example, let's say the formerly ...
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68 views

Valuation of Mortgage Backed floating notes

Does anybody have experience in valuation of mortgage backed floating notes? I have task to value the 4 different MBS floating notes. I know that it should be done through montecarlo, refinancing ...
3
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3answers
326 views

Risk prediction based on financial statements

I have a profit loss statement and balance sheet with the following fields: Example P&L Turnover420,363 - Cost of sales £118,730 £140,169 - Gross Profit ...
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0answers
270 views

Pricing a Power Contract derivative security

I'm trying to price a "power contract" and would appreciate guidance on the next step. The payoff at time $T$ is $(S(T)/K)^\alpha$, where $K > 0$, $\alpha \in \mathbb{N}$, $T > 0$. $S$ is ...
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1answer
118 views

Exposition of Growth in a Perpetuity

Something that's bugged me since I've ever learned anything about finance: Philosophically(?) speaking, why does growth subtract from a perpetuity's return? I know the mathematical explanation, but ...
5
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2answers
841 views

Credit Valuation Adjustments — computation issues

I'm currently working on my Masters project related to accelerating Greeks computations for CVA on mixed interest rate portfolios. I would like to know about the status of technology for CVA and its ...
9
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4answers
227 views

Are there any valuation models of securities that use hyperbolic discounting?

To quote Wikipedia: In hyperbolic discounting, valuations fall very rapidly for small delay periods, but then fall slowly for longer delay periods. This contrasts with exponential discounting, in ...
10
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1answer
473 views

Creating an n-factor Certainty Equivalent Discounting Formula

Brealey & Myers provide a certainty-equivalent version of the present value rule, using CAPM, as follows: $$PV_0=\frac{C_1 - \lambda_m *cov(C_1, r_m)}{1 + r_f}$$ $PV_0$ - Present Value of cash ...
5
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2answers
520 views

Which interest rate should I use for the discount rate in real-world pricing?

Suppose I want to compute the time value of money (present value, future value, etc). I need to put an interest rate into the calculation. Which real world interest rate would best be used here, ...
3
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1answer
253 views

Value of option-free instruments with a short-rate model vs the spot curve

You can calculate the value of an option free bond or swap by using the spot curve and discounting cashflows accordingly. Alternatively, apparently you can use a single-factor short rate model in a ...
5
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1answer
2k views

How would I value a perpetual bond with an embedded option?

I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it: ...
6
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1answer
739 views

Can options volume have an impact on the price of the underlying asset?

Can options volume affect the underlying asset price indirectly? I know that options buying/selling does not directly affect the price of the underlying asset (rather, the asset price contributes most ...
4
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2answers
212 views

How do earnings estimates respond to changes in underlying fundamentals and economic conditions?

Sell-side analysts' earnings estimates for individual companies, typically reported by I/B/E/S, are a key ingredient to many quantitative models. However, revisions to analyst estimates tend to lag ...
7
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1answer
329 views

Which valuation measures are most useful for equity market timing?

Competing academic studies, such as Asness's Fight the Fed Model and Lee, Myers, and Swaminathan's What is the Intrinsic Value of the Dow, offer differing answers to the question of whether equity ...
14
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2answers
1k views

What are the limitations of Gaussian copulas in respect to pricing credit derivatives?

The practice of using Gaussian copulas in modeling credit derivatives has come under a lot of criticism in the past few years. What are the major arguments against using the copula method in this ...