Questions tagged [fair-value]

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Theoretical justification for why estimating intrinsic value of a stock price can be different under FCFF and FCFE approaches?

what is the theoretical justification for why estimating intrinsic value of a stock price can be different under FCFF (Free Cash Flow to the Firm) and FCFE (Free Cash Flow to the equity) approaches? ...
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0answers
65 views

How to calculate the fair value of a futures roll and what are the practical uses?

Last month, I spent some time calculating the fair value of a futures contract in preparation for the current futures roll period. I've backtested it and noticed that fair roll generally gives me an ...
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1answer
225 views

Measuring bond fair value (richness/cheapness) using basic regression models?

Background Due to the nature of the curve (bond curve, swap curve etc), bond traders typically have some model that allows them to measure the "fair value" (FV) of a bond vs other bonds on the curve. ...
3
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1answer
86 views

Fair value of a binary cash-or-nothing option with a barrier

I want to find the fair value of a European cash-or-nothing option that pays \$1 if $S_t>K$ and $S$ breached the level $M<0<K$, where $S$ is the risk-neutral process $dS_t=\sigma dW_t$. My ...
5
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2answers
600 views

Valuation of open FX-Forward

So called closed FX-Forwards are well known forward contracts where some amount of foreign currency is bought at a specified date in the future for a price fixed "today". Such contracts can be ...
2
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1answer
275 views

What is the formula for calculating fair value of currency futures?

Let's use AUDUSD 6A futures contract as an example. How does the interest rate between AUD and USD give rise to the fair value calculation of AUDUSD 6A futures contract? Besides interest rates, are ...
1
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0answers
36 views

Volswap: fair strike and number of fixings

Let’s assume 1y vol is at 10.0% and there is no skew and the term structure is flat. Let’s assume there are 252 fixings and the annualisation factor is 252. 1) In a BS world, is it correct to say ...
1
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1answer
78 views

Fair Value Spread in ALM/ESG

Assume a bond portfolio in an ALM [Asset Liability Management] model or an ESG [Economic Scenario Generation] portfolio model. In order to be market consistent, a spread over the risk-free curve is ...