Questions tagged [valuation]

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

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42 views

Option Valuation under deterministic Volatility With Mathematica Code

What is "Option Valuation under deterministic Volatility" and how do we implement, evaluate it With Wolfram Mathematica Code?
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PRIIP Stressed Volca Calculation

Hello dear Finance mates, i have a question regarding the calculation of the stressed volatility for the stress scenario. I hope I actually typed the right formula for calculating the scenarios for ...
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39 views

Historical data on valuations for internet companies during dot-com bubble

I am looking for data on historical valuations for internet companies during the years of the dot-com bubble (2000 - 2002). I know that big auditors have or at least have access to such data on ...
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spinoff entity value / adjusted close of a spinoff

When company $A$ spins off company $B$ (i.e. $A = A'+B$), how do we know exactly the adjustment factor of $A'$ and $B$ before trading Note I am not asking to value the new companies. That's a whole ...
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42 views

Complicated DCF valuation [closed]

Recently I tried to do a few valuation models. I searched a lot for information on the topic, but everything I found was pretty similar simplified models. Please recommend where I can look at more ...
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What is the market convention for the stub floating payment on a vanilla swap?

Let's say I have a plain vanilla "broken date" swap (Annual fixed, 6m float) that I enter into today (10th Nov 20 for settle T+2, 12th Nov 20) and which ends on 16th August 2023. The swap is ...
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93 views

The real reason behind discrepancy between Amazon low level of earing of and its staggering market value? [closed]

It is often said that, in the history of Amazon, the discrepancy between its low level of earnings and its staggering market value can be justified by its high level of free or operating cash flows(...
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104 views

Impact of fixing on the valuation of derivatives

I would like to know what is the impact of a fixing on the value of a fixed vs floating interest rate swap (IRS). Also, I have the same question about the fixing impact on a cross currency swap? On a ...
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26 views

Should diverging valuation multiples affect beta estimate?

Suppose we experience a significant equity market crash. All equities are affected, but the drawdown disproportionately affects equities in a specific sector - for example, say the broad equity market ...
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Option Valuation With Hard To Borrow Rates

How would you include -in a simple way- high borrow rates, say 10%. Intuitively, for PUTs I'd set r as r - borrow_rate, to include the negative carry of the borrow. So If I'm selling puts, value would ...
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45 views

Is a company's exact debt structure publicly available to investors?

I am relatively new to investing and would like to look into some of the details of a few companies. As one example, we can use DAL. To assess the financial future of the company, it would be ...
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149 views

Valuation of Variance Swap

Let say I have a Variance Swap contract which is based on daily closing prices (not the continuous variance calculation) and will last between the day interval $T_1$...
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101 views

Cox-Ingersoll-Ross: Monte Carlo Simulation

I am trying to build a Monte Carlo simulation in Excel (yes, far from optimal) for valuation of a callable bond. I have some experience with MC simulation on path dependent derivatives with stocks as ...
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64 views

Is there some sort of index of products, their description, and pricing?

I'm imagining some sort of site where you can look up all sorts of products that are traded (swaps, bonds, options, and all the variations that they exist in), and then the site gives an extremely ...
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1answer
157 views

PV of the Floating Side of an “Overnight Index Swap” (at the fixing Date)

I have a mathematical / theoretical question regarding the PV of an Overnight Index Swap (Floating Side) at the time of fixing. Starting from this question: How to compute Overnight Index Swap (OIS) ...
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41 views

Spread sensitivity of TRS

I am about to understand the valuation of a TRS. The approach I am applying derives risk neutral survival / default probabilities from the ratio between risk free and spread adjusted rates and uses ...
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60 views

What are the most difficult/computationally expensive/infeasible derivatives to price?

I'm not sure if this question has a concrete answer or if it's more of a fun game, but I suppose the question that does have a concrete answer is what's the most difficult instrument to value that has ...
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Pricing a TRS using the Projected method for the financing leg and the Accrual method for the asset leg

I've been wandering if would be possible to value a TRS I have in an unusual way. I would like use the accrual method for the asset leg, since the the asset leg is a long position in an equity and it ...
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1answer
57 views

Trying to code Haug's 4.19.7 Double-Barrier Binary Asymmetrical

The following Clojure code correctly outputs the table in section 4.19.6 of "The Complete Guide to Option Pricing Formulas", but I'm wildly out on the asymmetrical in 4.19.7. ...
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38 views

Discounted Cash Flows in Excel

I'm taking an online class on stock valuation. In my class, the instructor calculated stock intrinsic value using XNPV function in Excel. While I understand this part, I don't know why it gives a ...
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94 views

In an interest rate swap, is the first payment based on the floating and fixed values set at inception?

Let assume 2 parties agree a plain vanilla swap with the following terms: Notional: $100,000 Length/Tenor: 3 year Payment/Settlement Periods: Annual Start Date: 01/01/2021 Floating Rate on Start ...
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Finding share class values in a complex ownership and capital structure

I’m curious about how you would deal with the following situation. The company is a startup with a complex ownership and capital structure. Any links or resources on these subjects would be greatly ...
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1answer
63 views

The extent of the usage of DDM formula by the big boys

I am wondering to which extent versions of the DDM formula(https://en.wikipedia.org/wiki/Dividend_discount_model) is used by large banks and institutional investors etc, in some sense anyone who is ...
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93 views

How to price complex corporate actions with spinoffs

Let's look at below UTX/RTN merger as an example: https://www.fool.com/investing/2020/03/30/raytheon-united-technologies-merger-gets-green-lig.aspx The merged companies will from that moment ...
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112 views

Discount margin on FRN - widening but bond price increasing?

Why would a bonds discount margin widen but its price increase? Shouldn't the price be falling when margins are widening? Looking at the bond pricing formula, if the price is higher doesn't the rate ...
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66 views

How to compute a portfolio value?

I am learning fundamentals of option market and ran into an example I do not understand : Let's assume I have a portfolio of 3 shares priced \$22, and a European call option to buy a share for \$21 ...
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80 views

Quant valuation of a credit card debt (or flexible loan)

What would you say is the generally accepted quantitative method of valuing an individual credit card, or flexible loan? Is the method very changeable if that were a pool of such loans? Suppose the ...
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122 views

Valuing Acquisition Target Case Study - DCF and IRR?

Wondering how best to answer a case study I need to do. Case study info as follows: Given Selling company's P&L (3 years actual, 4 years forecast) - closing date on end of year 3 - and a PPT of ...
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3answers
115 views

Modelling NPV with negative cashflows?

When making capital investment decisions that have cost saving implications instead of cash flow generation, is NPV still valid? For example: A state wishes to decide whether to replace a section of ...
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51 views

Risk neutral valuation logic/intuition

I was reading on risk neutral valuation and i ran into this statement "according to the law of one price , if you have two assets with identical expected cash flow , their current prices must be the ...
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1answer
55 views

Valuing interest tax shield with constant rate of loan redemption

A $D=\$30mm$ loan at $r_D = 6.5\%$ and a tax rate of $\tau_c=40\%$ yields an annual tax shield of $$TS=D*r_D*\tau_c=\$0.78mm$$ If $\rho=5\%$ of the loan remainder in the current year is to be payed ...
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35 views

Residual Income Valuation with Term Structure

I'm implementing a residual income model (RIM) to value stocks as described by Ohlson. https://pdfs.semanticscholar.org/c0a5/4ef41311951fe406d15cd7d7ce19502cdc7c.pdf The key to this model is ...
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1answer
48 views

Security Analysis By Benjamin Graham Example Doubt [closed]

So I was reading (trying to read) Security Analysis by Graham and I came across this example ("Example 1" in the image attached below) Being the noob at finance and quant that I am, I was unable to ...
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172 views

NPV and efficient market hypothesis

If I have an opportunity of investment, let's call it investment (A), that costs $I$ in year 0 and gives me $CF_1$ in year 1, I will accept it only if $NPV>0$ $NPV = -I + \dfrac{CF_1}{1+k} > 0$ ...
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1answer
74 views

How to calculate performance of a private equity investment?

Say an investment fund puts \$1 million into private equity investment in 3 installments (\$500k, \$250k, \$250k). You're given a data table which shows the date, contributions (\$500k, \$250k, \$...
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Which quantitative approaches recommended to buy NKE in 1985? [closed]

This is a historical quantitative finance question. Here is the NKE annual report from 1985. This company increased in value 500 times from 1985 to 2015. Please advise on quantitative finance ...
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112 views

Pricing of European put option with binomial model

This is an exercise from Mark Joshi's book (exercise 3.6): A stock is worth 100. Each month its value increases or decreases by precisely 10. The riskless bond is worth $e^{rt}$ at time t years with ...
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87 views

DCF Valuation Models

Does anyone know of any websites that have sample models or mind sharing their DCF models? Trying to get started modeling and can't seem to find many great resources. I know of Damodaran, but his ...
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205 views

Interest rate swap valuation date convention

When we value interest rate derivatives on any date $t$, we can estimate our future payments using some calibrated forward curve $f_s$, where $s$ is the spot date, and discount these back to $t$ using ...
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Possible to have different collateral for each party?

Normally bilateral credit support annexes would have both parties post/receive the same collateral be it US treasuries or cash etc. Are there CSAs Where each party has a different set of eligible ...
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1answer
97 views

Newbie question on Net Present Value with Constant Growth [closed]

Newbie here, trying wrap my head around on why this doesn't add up: Calculating the discounted cash flow of a perpetuity paying $1000 per year, 15% discount rate and 5% growth. If I calculate from ...
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1answer
147 views

Covered Interest Rate Parity with FX Spot-Adjustment

The Covered Interest Rate Parity for FX is often quoted simplistically as $$ X_T \quad=\quad X_S \cdot \frac{D^{base}_T}{D^{quote}_T} $$ where $X_t$ is the (projected) FX rate at time $t$ (denoted as $...
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1answer
185 views

Pricing under risk-neutral probabilities for weird derivatives?

I would really appreciate some help to value a weird derivative that I've found in an assignment: $$ X=(S_{T_1}-k)^{+} = \max(S_{T_{1}}-k;0) $$ which expires at time $T_{2}$ and uses the price at ...
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47 views

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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1answer
51 views

Transactional costs for shipping in % based on futures market price

Real case: Imagine I want to move an oil from one terminal to another. I have about 20 +/- tanker companies, but all of them have max capacity on their top deadweight (DWCC) vessel about ...
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Logic behind calculating a Carry Multiple associated with Startup Valuation [closed]

I'm reading a book called "The #1 Guide to Startup Valuation: How to value your startup in 12 easy steps" (p. 22-23) by Joachim Blazer. As one of the building blocks, namely "Return&...
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1answer
135 views

IPO Valuation: Share Pricing and Number of Shares

Does the number of shares matter for a company to go public? Suppose a company ABC went public and the initial valuation of the company shares to be sold stands at \$5000. Now, it can sell 1000 ...
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1answer
48 views

Sum disappearing when we assume constant some elements to be constant over time [closed]

I have the dividend discount model, which is the following expression: $$ P_{j,t} = \sum_{\tau=1}^{\infty}D_\tau(1+g)^\tau(1+r)^{-\tau}=\frac{D_{\tau+1}}{r-g} $$ Where $D_t$, is the dividend at time ...
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1answer
571 views

Comparing Values of 5s and 7% Notes (Security Analysis by Benjamin Graham)

I was reading Security Analysis by Benjamin Graham (Sixth Edition). Page 63, last paragraph says: A third kind of analytical conclusion may be illustrated by a comparison of Interborough ...
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147 views

Neural Networks for Estimation of Unmarked Private Asset Returns from Market Data

Let's assume it is March and my illiquid private assets portfolio is only 50% marked for 12/31, but I want to get the most accurate estimate of my final return for the quarter ended on 12/31. What is ...