Questions tagged [valuation]

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

Filter by
Sorted by
Tagged with
0
votes
0answers
34 views

Stock Valuation

Getting into account the different stock valuation methods, is there any good citation on modeling the growth parameter? As far as my humble research is concerned I have found only stochastic growth ...
0
votes
1answer
43 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 ...
0
votes
2answers
52 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 ...
1
vote
0answers
70 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 ...
0
votes
0answers
26 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 ...
0
votes
3answers
81 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 ...
0
votes
0answers
43 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 ...
0
votes
1answer
52 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 ...
1
vote
0answers
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 ...
0
votes
0answers
20 views

Share Repurchase Impacts in Abnormal Earnings Growth Model (AEG)

I am implementing an AEG model based off Ohlson (2005). The formula is as follows: $$ V_0 = \frac{E_t}{k} + \sum_{t=1}^n{\frac{1/k * (E_{t+1} - (1+k)E_t+kD_t)}{(1+k)^t}} $$ I'm debating how share ...
0
votes
1answer
36 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 ...
1
vote
2answers
85 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 $NPV>0$ $NPV = -I + \dfrac{CF_1}{1+k} > 0$ ...
2
votes
1answer
72 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, \$...
1
vote
0answers
35 views

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 ...
2
votes
2answers
70 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 ...
-1
votes
1answer
73 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 ...
0
votes
1answer
111 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 ...
0
votes
0answers
39 views

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 ...
1
vote
0answers
44 views

Newbie question on Net Present Value with Constant Growth

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 ...
0
votes
0answers
64 views

Real World pricing of a Constant Notional Cross Currency Swap

I have a question about Cross Currency (XCCY) Swap pricing in the real world. There are plenty of papers going nicely into detail, how XCCY Basis Swaps and XCCY Constant Notional Swaps work. Also ...
1
vote
1answer
84 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 $...
2
votes
1answer
176 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 ...
0
votes
0answers
53 views

Perpetual bond valuation between coupon dates

According to this Derive Perpetual Bond Price , I learned how to derive the formula of perpetual bond. However, I still have some questions. Firstly, do I need to change the formula when valuing the ...
1
vote
0answers
45 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? ...
1
vote
1answer
50 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 ...
1
vote
0answers
67 views

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", the Carry ...
2
votes
1answer
116 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 ...
0
votes
1answer
46 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 ...
2
votes
1answer
223 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 ...
4
votes
1answer
137 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 ...
1
vote
1answer
113 views

Volatility surface tenors

I don't think this has been asked before, but are the tenors on a volatility surface out of spot date for the currency pair or out of value T+0?
1
vote
2answers
272 views

Why use par-value weighted average when valuing portfolio of bonds?

I'm looking at a formula for valuing a portfolio of different bonds that sums the market value times the par value for each bond. Conceptually, why are the bond values weighted in this way by their ...
0
votes
0answers
575 views

Full Revaluation vs Factor-based Model for risk management

I am looking for literature on comparison of these two approaches. It looks like many places are using some type of Factor-based Model (Barra, Axioma, Northfield, etc.) for risk management purposes. ...
0
votes
1answer
73 views

Discounted free cash flow valuation

I started valuating company based on their free cash flow by using DCF valuation.But for some companies i came across negative free cash flow for all years. How can we evaluate company with negative ...
2
votes
1answer
73 views

Gordon's dividend valuation model: Ignoring optionality

Currently studying some papers on Behavioral Finance (the dividend puzzle), which employ some basic valuation models, calculating stock's fundamental value $P_t$. The most known is the discount of ...
0
votes
1answer
3k views

Valuation of repurchase agreement (classic repo)

From my understanding, a classic repo is an agreement for one party to get cash by placing collateral at a certain price and then get the collateral back at maturity by paying the initial cash plus ...
4
votes
1answer
679 views

Quantlib derivative valuation from zero curve

I have newly started with Quantlib-Python for valuing derivatives. In all the examples stated in this bolg or in other places, market quote is inserted and bootstrapping is done via individual rate ...
1
vote
2answers
775 views

Bond fund's roll and carry

This is a question about modelling the returns of a bond index. Understand there's quite a bit about the roll and carry of an individual bond, but what about a bond index. Roll I would calculate the ...
2
votes
0answers
36 views

Calibration of stock's intrinsic value under the gordon model

Assume we have the constant growth Gordon model, for a stock paying dividend $D$,Earnings per Share $EPS$, annual growth rate $g=ROE*(1-\frac{D}{EPS})$ and discount rate $r$. Then: $IV=\frac{D*(1+g)}...
1
vote
0answers
123 views

Hull Martingales and measures problem 27.16 7e?

Here's a question from Hull's Options Futures and Other derivatives which I'd appreciate if someone helped me to clarify. The question is from the chapter "Martingales and Measures" Suppose that the ...
1
vote
0answers
75 views

How to Calculate the Value of a Growing Perpetuity Using a State Price Matrix?

Summary I wish to value perpetual cash flows through state contingent claims on real consumption, where the state of the economy is assumed to follow a finite markov chain (Similar to Banz and Miller ...
1
vote
0answers
124 views

DCF valuation and the constant WACC assumption

I have a question that has been on my mind ever since I learned about DCF. I was taught that for the DCF to be valid WACC should be constant. As a physicist by training this assumption is strange to ...
4
votes
0answers
106 views

Why is market cap used to value equity instead of a self consistent solution?

My claim is that if we use the cost of equity of a levered firm via the DCF method then we make errors. Specifically if we find the firm is under-valued then in truth its more under-valued than we ...
3
votes
1answer
141 views

Rate of convergence between price and value

In my experience, there are two primary methods of alpha generation. In both cases, assume we know what price is. Method 1: Inference on what the price/payoff will be. Method 2: Inference on what ...
1
vote
2answers
221 views

Double knockout binary pricing?

I'm studying the pricing of a Double-Barrier binary option on the price of $S$. By this I mean an option that pays $X$ at maturity $T$ if the lower ($H1$) or upper barriers ($H2$) are not hit during ...
1
vote
1answer
869 views

Tobin's Q calculation using Compustat

I am calculating tobin's Q every quarter using the CRSP/Compustat quarterly dataset. Unfortunately, there are many missing values for the variables used in the tobin's Q formula. for example, if ...
1
vote
1answer
61 views

Calculating a firm's cost of debt using bond issues

When a firm issues coupon bonds that are traded on the open market these bonds can trade at either a premium or discount during the lifetime of the bond. If, for instance, the bond trades at a ...
1
vote
0answers
88 views

Valuation of a company

Alpha Corp purchases Beta Sub. Alpha Corp finances the purchase price of € 100 million by raising € 50 million in debt and € 50 million in equity issued by Alpha. The debt is risk free and the ...
0
votes
1answer
220 views

Transaction multiple EV/LTM EBITDA

Envestnet acquired Yodlee in 2015. I need for this transaction the multiple EV (enterprise value) over last twelve months EBITDA. Can anybody help me with this? In the respective investor relations ...
2
votes
2answers
333 views

Floating rate note value approximation

I was hoping somebody can assist me with a query. Would it be a valid approach to revalue a frn with a discount margin from a comparable bond as par minus the difference between the quoted margin and ...