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Questions tagged [valuation]

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

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Pricing / valuing anticipated repayment date

I am a long time lurker, and frankly not a quant, but have deep respect for those that are. I have found myself in a situation dealing with some features on debt that I am trying to figure out how ...
Curious poster's user avatar
2 votes
0 answers
59 views

Calculating value of vanilla swap after effective date

I'm trying to find the value of a fixed to float interest rate swap using Rateslib library but I'm running into a few issues. I've followed the code exactly as the link here but now I'm trying to ...
rubiks99's user avatar
3 votes
1 answer
284 views

Clarifying the Fundamental Difference Between Growth and Value Stocks

The more I think about the fundamental difference between growth and value stocks the more confused I am. Both strategies seem to exploit market mispricing: growth investors target underestimated ...
vonjd's user avatar
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Calculating FX Forwards Using Spot Prices and Discount Factors for Exotic Currency Pairs

We need to value FX forwards for some exotic currency pairs using a third-party system that does not provide the forward rates. The system can provide spot prices. Is it correct (real) to calculate ...
seldonzzz's user avatar
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How do I determine the ideal selling price for a cash flow that rises with inflation?

Let's say I own a parking space. I have two options: I can rent out this parking space for $1,000/month. I am assuming that the rent will keep pace with inflation, which we'll call 2% over the long ...
Vanilla551's user avatar
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1 answer
62 views

FX-Effect on (foreign) interest rate future

this is not (directly) a quantitative question but since there are so many knowledgeable people here and I've found so many helpful discussions in the past, I ask it nonetheless (I haven't found an ...
CouldUseSomeHelp's user avatar
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61 views

Total return swap valuation of return leg

I have a question on valuing the return leg of a Total Return Swap (TRS). Consider a TRS where I receive the return of an underlying bond (let's ignore default). The TRS was traded at time $t = 0$. At ...
Walter's user avatar
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Autocallables - valuation/modelling/booking

Recently heard a view on how one should model/book autocallable swaps (in its basic form where there is a series of observation dates on which the product autocalls and there is exposure to the ...
eMe's user avatar
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Real Options for investment valuation (Basics)

Thank you for checking out this post. I already asked a question once on this forum, and you did a great job helping me out with that topic, as I couldn’t have come across a solution myself. This time,...
Bourrinou3's user avatar
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Accuracy/Quality of financial data: revised financials or historical financials?

I am currently working on calculating financial metrics, particularly Free Cash Flow to Equity (FCFE) etc., for investment analysis. In the context of financial analysis, I'm wondering which set of ...
Dominik's user avatar
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Floating side value of a swap [duplicate]

I have some trouble to understand on valuing the floating side of a swap. In my book, the value of floating side at the time t is; $$ P(t,T_0) - P(t,T_n) $$ Where $$ P(t,T_n)$$ denotes the value of ...
FMM's user avatar
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Valuation via decomposition or via simulation of the underlying?

My question might be very straight forward but I have seen both approaches being followed in practice so I am curious to see if there are arguments in favor or against each one. I am explaining my ...
Kostas's user avatar
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1 answer
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Non-stationarity and repricing as a source of idiosyncratic and systematic "risk"?

1.Assuming a one period economy with two assets in which cash flows are assigned certain probabilities, using the CAPM, we can derive the P0 given the E(CF) at t1. Within this distribution, we have ...
Leonid Konoplev's user avatar
1 vote
2 answers
128 views

Why do we need an ex-dividend date? [closed]

Why do we need an ex-dividend date? What is the problem with the ex-dividend date being the same as the payment date? Why are they separate? What problem does having a separate ex-dividend date solve? ...
s5s's user avatar
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How to approximate a function in the H-model

I have been looking to understand the H-model in finance, that is used for stock price valuation. In particular, I wanted to formally derive the final formula: $$PV=\frac{D}{r-g_2}\left[1+g_2+\frac{H}{...
Mr. Ivan's user avatar
1 vote
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46 views

In traditional asset pricing and valuation, why does the cost of equity increase with the AMOUNT of leverage but not with DEFAULT RISK? [closed]

When a firm's default risk increases, the cost of debt obviously rises, which increases the WACC and decreases firm value. However, what happens to the cost of equity in this case? Has the proportion ...
lkonoplev's user avatar
1 vote
1 answer
211 views

Pricing various classes of derivatives and replicating them

Consider the following three derivative styles and assume zero dividends for simplicity. The "american style", "european style", and "infinite" style: $$L_{A}(S,K,t,T)=f(...
Cris's user avatar
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1 vote
1 answer
351 views

Calculate PE ratio of equal-weighted index

I need to calculate Price-to-Earnings Ratio (PE Ratio) of an Equal-weighted index. ...
Maddy's user avatar
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3 votes
0 answers
115 views

For derivatives pricing, does FEM actually ever outperform FDM?

Simple question that I was wondering about over during the weekend. I have done a little FEM during the last years and my university time and did not spend a lot of time with FDM. For a new job I have ...
freistil90's user avatar
1 vote
0 answers
72 views

How can I correctly assess the risk of real estate debt fund? [closed]

I'm trying to assess the attractiveness of real estate debt funds. I'm very surprised when I look at the investment performance of many of those funds. Many of them have no negative returns, and can ...
Literal's user avatar
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6 votes
8 answers
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Conceptual problem with risk neutrality-What is a 'risk-neutral world', exactly?

I have persistent, deep problems with the concept of 'risk-neutrality'. To make it more precise, let's look at the following explanation taken from a book: "In a world where investors are risk ...
Big_Fish1994's user avatar
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What is the meaning of Domestic Exchange Rate here?

So I have the following formula for the Pricing of a Quanto Option (see image below). While I understand this formula pretty well, I am not sure what is referred to as "domestic exchange rate&...
Ozee's user avatar
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1 answer
106 views

Monthly and annual arithmetic mean in valuations? [closed]

I know this is back to basics but I am perplexed by it!!! Assume that the future value (FV) of an investment at the end of year 1 is 112, the annual arithmetic expected return is 12%, hence the ...
lkonoplev's user avatar
1 vote
0 answers
131 views

How xVA is applied to determine final price

Typically, the Actual price is derivative transaction (e.g. Swap) is sum of Base price and xVA e.g. cVA. Where Base price is analytical price with consideration of standard parameters e.g. risk free ...
Bogaso's user avatar
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3 votes
2 answers
175 views

Expected vs required return in valuation

This is a rather simple question, so this is maybe not the right place, but... I have done quite a bit of reading on predicting asset returns, i.e. determining return expectations. I have now started ...
shenflow's user avatar
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0 answers
64 views

Pricing of constant leverage certificates

I am trying to value the open-ended constant leverage certificates like Bull DAX 20x. As the certificates are reset daily with the movements of the underlying asset, how could they be modeled for ...
Tomas's user avatar
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1 vote
0 answers
100 views

Market value of futures [closed]

What is the market value of an (index) futures? I guess the market value is either: quantity * contract size * price zero, if the daily unrealized PnL is ...
Tomas's user avatar
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0 answers
177 views

Balance Sheet Value of a Repo

I am relatively new to repos and I am trying to find out whether there is a standard practice for calculating balance sheet value of a repo. Are there any regulations that prescribe how banks shall ...
Platon's user avatar
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1 vote
1 answer
620 views

Interest rate swap Profit and loss attribution

I am wondering how the IRS daily PnL will normally be attributed from trader's/market risk perspective. Will it be broken down into three parts daily carry (Daily interest accrual), daily roll-down (...
kit's user avatar
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1 vote
0 answers
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How to use coherent risk measure for evaluating price?

Coherent risk measures are defined by number of axioms (see e.g. Coherent Risk Measure) but a question that does not seem well studied is how to use them. Let's take a coherent risk measure $\rho$ and ...
Mathieu Dutour's user avatar
8 votes
4 answers
648 views

How to fundamentally value cryptocurrencies?

Investing in cryptocurrencies is a wild ride. There is obviously a lot of speculation involved but my question is another one: what are good models to evaluate the fundamental value of ...
vonjd's user avatar
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0 votes
1 answer
224 views

How would the following be priced?

Suppose we introduce the following: a token S with an initial supply of a 1000. At $t_0$, a 1000 different parties $P_1,\dots,P_{1000}$ each buy a single token for $1$\$. Whoever has the most tokens ...
user2520938's user avatar
2 votes
0 answers
39 views

Determine if stocks are hurt by rates or recession fear

Looking at a portfolio of growth stocks which traded at high multiples until end of last year. Stocks have been underperforming (no surprise there) but I'm trying to find ways to determine, ...
tweedi's user avatar
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0 votes
1 answer
282 views

Bond value as a function of spread change and duration/maturity

I am trying to calculate the change of value in a universe of bonds given a series of shocks to the credit spread of each bond. As a constraint, the initial dataset only contains the spread change for ...
sets's user avatar
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0 votes
0 answers
31 views

Valuation of companies, which belong to each other

There are three companies: A, B and C. A fully belongs to B, B fully belongs to C and C fully belongs to A. Company A has USD 1 mln of cash and no debt. Company B and C each have USD 10 mln of cash ...
Ilya Tegmark's user avatar
1 vote
1 answer
137 views

What is the name and payoff of this exotic option (where the holder can lock in a price)?

An exotic option is described as follows: Let $S_t$ be the underlying at $t$. The holder has the option to lock in the current price during the lifetime of the option, which he does for $S_{t}=50$. ...
PaulG's user avatar
  • 113
0 votes
2 answers
78 views

Between these bonds, how to find out which is one pricey (Higher valuation) and cheap (Lower valuation)?

Trying to understand, how to find out which of these bonds are cheap and which are expensive? The current spot rate is 8.167%. How do I go about finding the cheap vs expensive bonds especially when ...
nsivakr's user avatar
  • 119
0 votes
1 answer
99 views

Valuation discount rate using risk free interest rate versus inflation rate

Imagine a world where, for a given time period, the expected inflation rate is 10%, but the nominal risk free interest rate over the same period is 5%. Should my starting point - from a discounted ...
Bryan Franco's user avatar
1 vote
0 answers
123 views

Infering the discounting rate for an illiquid company

Let's say I would like to determine the incremental discounting rate (e.g. as in IFRS-16) for a company $X$ with a rating score of $Y$ and belonging to a sector $Z$. Usually, any data provider such as ...
KT8's user avatar
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0 votes
0 answers
223 views

Valuation of chooser options

The below formula for valuation of chooser options from Hull's book is not making sense to me. Why do we use call value at time T=0 while we use put value using t=0 call value and discount strike and ...
Shetu's user avatar
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0 votes
1 answer
89 views

Expected return over what time horizon?

In finance, it is common to price things at their discounted expected value. What time horizon is the market generally thought to consider? Is it a "money-weighted" average of expected ...
justasking's user avatar
1 vote
1 answer
5k views

How to attribute daily options P&L between Greek sensitivities [duplicate]

When building a P&L attribution system for options, what is the market convention for attributing daily P&L between delta, gamma, vega, and theta Greeks? I'm particularly interested in how ...
equanimity's user avatar
0 votes
2 answers
194 views

Are Accounts Receivable and Accounts Payable already included in revenue?

I've been following this Udemy course on finance and valuation basics (Link). I am particularly confused when it comes to the cash flow statement part, specifically on how to get Operating Cash Flow (...
imavv's user avatar
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0 votes
0 answers
98 views

Floating rate bond valuation and Duration

I would like to know how a floating rate bond will be valued when LIBOR is used to compute the coupon cashflows and the bond is discounted using an OIS rate. Normally I have seen valuation of a FRB ...
Jaya Mohan's user avatar
-1 votes
1 answer
428 views

Using a Swap curve to price Interest rate Swaps

Say we have a 3-m LIBOR IRS (interest rate swap) with quarterly fixed payments (2 year contract), and we want to value this contract (after say 6 months has passed, i.e. there remain 1.5 years to ...
Student's user avatar
  • 39
0 votes
2 answers
472 views

Which Risk Free rate to use?

I am trying to value a food and beverage company using DCF. I have forecasted the short term projections for 10 years and calculated a terminal value there after. But I am confused with which risk ...
justbegancoding's user avatar
1 vote
1 answer
478 views

Total Return Swap on Single Govt Bond Marked to Market Calculation

Looking to understand how to value a TRS on single 10y UST during the life of the trade. Here is an example of trade parameters. 10mm constant notional 1-year maturity I am performance leg payer / ...
smc22's user avatar
  • 11
1 vote
1 answer
567 views

Work out example of Valuation adjustment

Currently, there are many valuation adjustments for the fair price of a derivative instrument, when pricing is based on RFR. One of such adjustment is ...
Brian Smith's user avatar
1 vote
1 answer
135 views

How to handle cash from financing in a DCF model? [closed]

I am building a valuation model for a public pre-revenue company (biotech). The company is going to have ~$600M in R&D and SG&A expenses over the next 4 years, which it is going to finance ...
nijshar28's user avatar
3 votes
0 answers
68 views

How to reconcile CAPM with Discounted Cash Flows valuation?

According to CAPM (in its most basic form) our asset allocation will only depend on the expected returns and the covariance matrix of returns. If we also consider the risk-free asset and assume that ...
Alex Ortiz's user avatar

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