Questions tagged [valuation]

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

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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 ...
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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 ...
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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 ...
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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 (...
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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 ...
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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 ...
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Constant growth model

Let us assume that we perform the valuation of a company using the constant growth model, i.e. PV = FCFF / ( cost of equity - growth rate) At the end of the analysis we get a given value. Let us ...
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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 ...
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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, ...
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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 ...
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Pricing any Payoff structure using Binomial Tree(Pricing DDTPS)

I just wanted to confirm if its theoretically possible to value any derivative with a payoff that can be replicated by a portfolio of options,underlying and bonds. I wanted to value DDTPS which is a ...
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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 ...
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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 $S_{t}=50$. ...
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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 ...
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Counterparty Credit Risk - Reference book for a mathematical introduction [duplicate]

Which book would you recommend for an introduction to CCR from a mathematical perspective? I would like to complement the Jon Gregory's book "the XVA Challenge" with a more quant oriented ...
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Calculating Changes in Net Working Capital: Balance Sheet vs Income Statement

CHG Net Working Capital = (Working Capital)|t -(Working Capital)|(t-1) ...
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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 ...
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Infering the discounting rate for an illiquid company

Let's say I would like to obtain an incremental discounting rate (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 ...
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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 ...
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Expected return over what time horizon?

It is common to price things at their discounted expected value; for the example of a stock, over what time horizon is this thought to occur in academic finance?
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DV01 formula for an interest rate swap using OIS discounting

I am looking for a formula / approximation to calculate the PV impact of shifting the par swap rate of an interest rate swap in the multicurve setting, e.g. of a swap on 6m LIBOR with OIS discounting. ...
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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 ...
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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 (...
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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 ...
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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 ...
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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 ...
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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 / ...
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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 ...
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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 ...
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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 ...
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Initial value of an investment project in a binomial real option valuation model

How do you measure the initial value of a project in a binomial tree ROV? I'm not specifically working in the valuation scene, but sort of had an interest in how the models work logically. It's not ...
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Are there any APIs to retrieve stock buybacks and dividends to calculate ERP?

I'm in the process of building a Python library to value stocks using a FCF model and one of the first steps is calculating an implied equity premium. I know there a few ways of doing this, but ...
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Global stock market valuations

I am looking for reasonably up to date resources on global stock market valuations by country, using e.g. CAPE and PE. In the past I have used this resource: starcapital.de, but the updates have been ...
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Tech companies valuation

Usually tech companies/stocks are valued using one of the two methods: DCF (discounted cash flows) method that is sensitive to interest rates raise (if rates up value down) EBITDA or revenues ...
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Do stock prices really tend towards a fair valuation?

I recently started working myself into the concepts of valuation. While I find the concept of fair value very interesting and intuitive, I wonder if prices are actually empirically driven by value in ...
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Valuation of the minimum guaranteed return that (some) pension funds provide - how would you do it?

Let's say a pension fund guarantees an annual return of at least 5% to their customers/investors, such that the investors face a payoff like the one of a call option (no downside). For this guarantee ...
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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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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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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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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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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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1 answer
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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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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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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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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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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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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 ...