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LAU, KA WO, and YUE KUEN KWOK. "VALUATION OF EMPLOYEE RELOAD OPTIONS USING UTILITY MAXIMIZATION APPROACH." International Journal of Theoretical and Applied Finance 08, no. 05 (August 2005): 659–74. http://dx.doi.org/10.1142/s0219024905003189.
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The reload provision in an employee stock option is an option enhancement that allows the employee to pay the strike upon exercising the stock option using his owned stocks and to receive new "reload" stock options. The usual Black–Scholes risk neutral valuation approach may not be appropriate to be adopted as the pricing vehicle for employee stock options, due to the non-transferability of the ownership of the options and the restriction on short selling of the firm's stocks as hedging strategy. In this paper, we present a general utility maximization framework to price non-tradeable employee stock options with reload provision. The risk aversion of the employee enters into the pricing model through the choice of the utility function. We examine how the value of the reload option to the employee is affected by the number of reloads outstanding, the risk aversion level and personal wealth. In particular, we explore how the reload provision may lower the difference between the cost of granting the option and the private option value and improve the compensation incentive of the option award.
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Shee, Apurba, Carlo Azzarri, and Beliyou Haile. "Farmers’ Willingness to Pay for Improved Agricultural Technologies: Evidence from a Field Experiment in Tanzania." Sustainability 12, no. 1 (December 26, 2019): 216. http://dx.doi.org/10.3390/su12010216.
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Initiatives on the sustainable intensification of agriculture have introduced improved technologies tailored to farmers’ local conditions by trial demonstration with free provision of improved seeds and fertilizers. It is not clear, though, whether smallholder farmers would be willing to pay for these technologies, and what factors determine their informed demand. Using a contingent valuation experiment, combined with information at baseline among 400 households in Northern Tanzania, this study measured farmers’ willingness to pay (WTP) for hybrid maize seed and local inorganic fertilizer. Farmers’ WTP was estimated using a dichotomous contingent valuation with follow-up model. Results showed that the average WTP was 61% higher for hybrid maize seed, and 15% lower for inorganic fertilizer, than their respective average local market prices during the reference period, suggesting that farmers were willing to pay a premium for hybrid maize seed, while they did not seem to be interested in fertilizer purchase at current market price. Moreover, since improved access to extension services was found to positively affect farmers’ WTP, strengthening extension services could be a suitable policy intervention to increase farmers’ demand for improved technologies. On the other hand, farmers’ risk aversion was negatively correlated with WTP for both technologies. This result suggests that encouraging risk reduction options, such as agricultural insurance, could be a useful policy strategy for boosting farmers’ demand for improved agricultural technologies.
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Banda, B. M., S. Farolfi, and R. M. Hassan. "Estimating water demand for domestic use in rural South Africa in the absence of price information." Water Policy 9, no. 5 (October 1, 2007): 513–28. http://dx.doi.org/10.2166/wp.2007.023.
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The paper applies the travel cost method (TCM) to estimate the value that rural households in the Steelpoort sub-basin of South Africa place on river and collective tap water. While the TCM calculations are based on the opportunity cost of the time household members spend on water collection, the resulting welfare values are close in magnitude to the estimates obtained using a contingent valuation method (CVM) on the same sample. The paper shows that in the absence of price data, the TCM provides satisfactory estimates of benefits where direct estimation of demand elasticity would otherwise be impossible. According to both methods, households consuming river water attribute higher value to the resource than collective tap users. The income elasticity of the trip generating function is much higher than that of the opportunity cost of time (price), implying that household's water use behaviour would be more responsive to factors affecting household income than to price incentives. Comparing the estimated values with actual operating and maintenance cost of water provision in the study area suggests that policies promoting cost-covering water tariffs have a potential to succeed.
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Lóránt, Anna, and Maria Farkasné Fekete. "More insurance subsidies for European farmers – is it needed?" Applied Studies in Agribusiness and Commerce 9, no. 4 (December 30, 2015): 33–38. http://dx.doi.org/10.19041/apstract/2015/4/4.
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In addition to traditional sources of uncertainties, such as market price volatility and animal and plant health-related risks, the impacts of climate change have recently become a major concern in the agricultural sector throughout the world. Insurance has been commonly proposed as a key instrument in farm risk management, and agricultural insurance schemes have become more widespread both in developed and developing countries. We conducted a case study in the UK to investigate farmers’ risk perception and willingness to pay for crop insurance by using contingent valuation method (CVM). Similarly to the experience from developing countries, we found that farmers are less willing to pay for insurance, however they do take actions to reduce their risks. While these results suggest that the provision of premium subsidies to European farmers can be justified; in order to avoid counter-productive policy outcomes, one may consider the introduction of a risk-based approach in agricultural risk management.
JEL classification: Q14
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Kakuru, Willy, Nelson Turyahabwe, and Johnny Mugisha. "Total Economic Value of Wetlands Products and Services in Uganda." Scientific World Journal 2013 (2013): 1–13. http://dx.doi.org/10.1155/2013/192656.
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Wetlands provide food and non-food products that contribute to income and food security in Uganda. This study determined the economic value of wetland resources and their contribution to food security in the three agroecological zones of Uganda. The values of wetland resources were estimated using primary and secondary data. Market price, Productivity, and Contingent valuation methods were used to estimate the value of wetland resources. The per capita value of fish was approximately US$ 0.49 person−1. Fish spawning was valued at approximately US$ 363,815 year−1, livestock pastures at US$ 4.24 million, domestic water use at US$ 34 million year−1, and the gross annual value added by wetlands to milk production at US$ 1.22 million. Flood control was valued at approximately US$ 1,702,934,880 hectare−1year−1and water regulation and recharge at US$ 7,056,360 hectare−1year−1. Through provision of grass for mulching, wetlands were estimated to contribute to US$ 8.65 million annually. The annual contribution of non-use values was estimated in the range of US$ 7.1 million for water recharge and regulation and to US$ 1.7 billion for flood control. Thus, resource investment for wetlands conservation is economically justified to create incentives for continued benefits.
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Mellizo, Philip Pablo. "Do consumers value employee ownership? Evidence from an experimental auction." Journal of Participation and Employee Ownership 1, no. 2/3 (September 10, 2018): 162–90. http://dx.doi.org/10.1108/jpeo-10-2017-0001.
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Purpose The purpose of this paper is to evaluate how the public at large perceives employee ownership, and how public perceptions of employee ownership translate into consumer valuation of goods and/or services produced by employee-owned firms. To the extent that consumer interest regarding the governance and ownership structure of firms matters in their purchasing decision, an employee-owned certification label could be an instrument by firms to segment consumer demand, differentiate products and potentially realize a competitive advantage. Design/methodology/approach Three specific questions are evaluated using the fifth price, experimental Vickrey valuation auction. First, the author obtains estimates of willingness to pay (WTP) premia for a specific item (coffee) differentiated in a controlled setting by the certifications labels that signal various non-market attributes. Specifically, the author examines the WTP premium for coffee that is eligible for the Certified Employee-OwnedSM label, the Fair Trade CertifiedTM Certified label, as well coffee that qualifies for both labels. Second, the author introduces a treatment to evaluate how the provision of information produced by the third party certifiers affects WTP estimates. And third, the author exploits the use of a controlled setting to evaluate how passive sensory information (i.e. taste) may influence the WTP valuation of the labels. Findings WTP premia for coffee carrying only the EO label only increase by 67 cents relative to conventional coffee, which was not significantly different from zero. Bids for both FT and EO&FT labeled coffee were, however, positive ($1.22 and $2.17, respectively) and are also statistically significant. The circulation of information to subjects about the certification programs resulted in increased bids. These bid differences were statistically significant for FT and EOFT coffee, but again, not for EO labeled coffee. Finally, differences in tastes did not appear to drive significant differences in bidding behavior, suggesting that WTP consumer decisions are strongly influenced by non-market attributes. Originality/value Marketers, economists and others have an interest in determining the monetary value individuals place on non-market goods for a variety of reasons; from forecasting new product success to understanding consumer and individual behavior. Unfortunately, many currently available stated preference techniques suffer from hypothetical bias while revealed preference techniques rely on indirect measures. Experimental auctions mitigate some of these issues since they involve individuals exchanging real money for real goods in an active market. WTP valuation has been conducted on a wide variety or products, but none that capture consumer valuation of employee ownership.
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Anderson, Steffen, Glenn W. Harrison, Morten I. Lau, and Rutstrom E. Elisabet. "Valuation using multiple price list formats⋆." Applied Economics 39, no. 6 (April 2007): 675–82. http://dx.doi.org/10.1080/00036840500462046.
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Torre, Andrew, and Darryl Whitford Coulthard. "Shadow pricing utilitarian justice: some tentative estimates." International Journal of Social Economics 48, no. 8 (April 29, 2021): 1089–104. http://dx.doi.org/10.1108/ijse-07-2020-0463.
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PurposeThe purpose of this paper is to recognise and provide an approach to estimate the value of an institution that produces a public good to the wealth of a nation. Specifically, the authors value utilitarian justice.Design/methodology/approachThe paper employs the classical economic theories of crime and shadow pricing to estimate the total economic value and shadow prices or social productivity of police and higher court deterrence. These measures are estimated using the definitions provided by Dasgupta and by re-engineering key deterrence elasticity estimates gleaned from Australian econometric studies.FindingsThe empirical findings suggest a relatively high social value for police and higher court deterrence. Notwithstanding, addressing socio-economic disadvantage is likely to prevent more subsequent offences than directing more resources to the operation of the criminal justice system.Research limitations/implicationsThe key limitations involve the sensitivity of the estimates to error. Further work is required on all the estimates in the model and in particular the social costs of the serious offences. The next step is to estimate the opportunity cost of supplying police and court deterrence. The cost estimate can then be combined with the estimates of social benefits to estimate a benefit-cost ratio. The model in broad terms demonstrates a way forward to estimating the economic value of and the social productivity of the criminal justice system. The provision of retributive justice is also ignored in this contribution. This requires a separate analysis.Social implicationsThe social implications are that there appears a way to both justify and evaluate the criminal justice system and this methodology may be applied to the operation of other public services.Originality/valueThe originality of this paper lies in suggesting a method to solve the valuation problem for the jointly produced public goods of the higher courts and police.
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Lopes, Ana Isabel, and Laura Reis. "Are provisions and contingent liabilities priced by the market?" Meditari Accountancy Research 27, no. 2 (April 8, 2019): 228–57. http://dx.doi.org/10.1108/medar-09-2017-0212.
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PurposeThis paper aims to examine pricing differences regarding contingencies presented in statements of financial position or notes, which are considered an area for creative accounting.Design/methodology/approachThe authors have chosen two countries with different cultural environments to test the exploratory study. The sample includes companies using the International Accounting Standard (IAS) 37, which requires recognition of provisions while contingent liabilities are only disclosed, implying different impacts from underlying judgement related with contingencies. The authors apply a regression model based on the Ohlson equity-valuation framework.FindingsThe most important conclusion is that market participants in both countries follow different patterns when incorporating information about provisions and contingent liabilities. More precisely, the results suggest that provisions are value-relevant, but incrementally less negative in Portugal. Contingent liabilities seem to have no value relevance. However, an exception exists for Portuguese companies having a risk committee board, in which case a significant market valuation of contingent liabilities is found and discounted in share prices. The existence of a risk committee corroborates the value relevance of this board, which is positively valued by market participants in both national cultures.Practical implicationsThe findings may make a contribution to the IASB research project on the IAS 37 and possible amendments to it (suspended until the revisions to the conceptual framework are finalized) and to the IASB prioritization of communication effectiveness of financial statements to all users.Originality/valueValue relevance of contingencies differentiating countries from two different national cultures and firms with a risk committee on the board of directors.
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Ong, Chui Zi, Rasidah Mohd-Rashid, and Kamarun Nisham Taufil-Mohd. "IPO valuation using the price-multiple methods: evidence from Malaysia." Journal of Financial Reporting and Accounting 19, no. 4 (February 1, 2021): 540–70. http://dx.doi.org/10.1108/jfra-05-2020-0128.
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Purpose This study aims to investigate the valuation accuracy of Malaysian initial public offerings (IPOs) by using price-multiple methods. Design/methodology/approach Cross-sectional data including 467 IPOs listed on the Malaysian stock exchange were used for the period of 2000–2017. This study used univariate ordinary least square (OLS) regression to analyse the relationship between IPOs’ price-multiples and comparable firms’ price-multiples. The test of valuation accuracy was conducted via computing valuation errors by segregating the sample into two groups: fixed-price IPOs and book-built IPOs. Furthermore, multiple OLS regression was used to examine the influence of IPO valuation on underpricing. Findings The findings of the results suggested that IPOs price-to-earnings (P/E), price-to-book (P/B) and price-to-sales (P/S) multiples were positively related to the median P/E, P/B and P/S multiples of five comparable firms matched by industry and revenues. The P/S multiple was shown to be the most significant valuation method, specifically in book-built IPOs. The findings indicated that those firms that had a lower valuation in comparison to the comparable firms were inclined to underprice their IPOs to allure investors to subscribe IPOs. In addition, book-built IPOs that had fair valuations were inclined to generate higher initial returns for investors. Practical implications The findings of this study observed implications for underwriters in avoiding the mis-valuation issue by considering the book-building mechanism. Originality/value This study attempted to explore the suitability of the valuation method to value IPOs in Malaysia.
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Boogert, Alexander, and Cyriel de Jong. "Gas storage valuation using a multifactor price process." Journal of Energy Markets 4, no. 4 (December 2011): 29–52. http://dx.doi.org/10.21314/jem.2011.067.
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YUSUF, ARIEF ANSHORY, and PHOEBE KOUNDOURI. "Willingness to pay for water and location bias in hedonic price analysis: evidence from the Indonesian housing market." Environment and Development Economics 10, no. 6 (November 21, 2005): 821–36. http://dx.doi.org/10.1017/s1355770x05002548.
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Hedonic valuation of quality attributes can be misleading when the assumption that these attributes are exogenous to sample selection is violated. This paper considers the simultaneity between hedonic valuation and sample selection in the context of a model of consumer behavior over packaged goods and investigates empirically how the decision on house location (urban/rural) affects the household's valuation of water-related characteristics of the house in question. The empirical analysis uses data from the Indonesian housing market and suggests that households value access to safe and improved domestic water sources. However, failing to correct for sample selection results in a biased valuation of willingness to pay for house characteristics. This might misguide policy recommendations for improved provision of domestic water, based on cost–benefit analysis.
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Powe, N. A., G. D. Garrod, and K. G. Willis. "Valuation of urban amenities using an hedonic price model." Journal of Property Research 12, no. 2 (June 1995): 137–47. http://dx.doi.org/10.1080/09599919508724137.
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Moriarty, Noll. "Oil price forecasting using probabilistic projection of the United States dollar." APPEA Journal 51, no. 1 (2011): 411. http://dx.doi.org/10.1071/aj10026.
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Accurate forecasts for medium-term commodity prices are essential for resource companies committing to large capital expenditures. The inaccuracy of conventional forecasting methods is well known because they tend to be extrapolations of the current price trend. The inevitable reversal catches many by surprise. This paper demonstrates that medium-term (2–5 years) commodity prices are not strongly linked to economic health and commodity demand-supply, but are instead inversely controlled by supply-demand for the United States dollar (USD) and consequent valuation. P90, P50 and P10 projection bounds for future valuation of the USD are presented based on the successful probabilistic techniques of the petroleum exploration industry. This allows probabilistic projections for the oil price, which is inversely related to the USD valuation. I show that the USD is significantly undervalued at present. Probabilistic projection of the USD valuation indicates that likely appreciation will put downward pressure on commodity prices for the next 2–5 years. If the USD premise is correct, likely appreciation of the dollar during the next 2–5 years will hold stable, or even decrease, oil price to around USD $50 BBL. This is a contrary expectation to most forecasts—one which, if it eventuates, should give cause for reflection before committing to large capital expenditures. Further investigation could examine the extent to which the USD valuation can be modelled as a fractal phenomenon. If so, it would mean the USD valuation is not driven by conventional economic fundamentals; instead, it is a semi-random number series with serial correlation. If true, probabilistic forecasts of the USD can be significantly improved, hence that of medium-term commodity prices.
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Halsey, Robert F. "Using the Residual-Income Stock Price Valuation Model to Teach and Learn Ratio Analysis." Issues in Accounting Education 16, no. 2 (May 1, 2001): 257–72. http://dx.doi.org/10.2308/iace.2001.16.2.257.
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This article provides an overview of the residual-income stock price valuation model and demonstrates its use in interpreting the DuPont return on equity (ROE) decomposition. The model provides theoretical support for the DuPont model's focus on ROE and aids in understanding the implications of the price-to-book and price-earnings ratios. I conclude with an application of the model in the valuation of Nordstrom, Inc.
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Gustafsson, Janne. "Valuation of Research and Development Projects Using Buying and Selling Prices: Generalized Definitions." Decision Analysis 17, no. 2 (June 2020): 154–68. http://dx.doi.org/10.1287/deca.2019.0401.
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This paper develops generalized versions of the concepts of buying price, selling price, and short selling price by employing abelian groups. Such generalized pricing concepts are especially useful for the valuation of research and development (R&D) projects, which are often characterized by unquantifiable uncertainties and nonnumeric inputs and outputs, such as know-how and intellectual property. Moreover, the generalized definitions are also applicable to the valuation of other kinds of features in the decision setting, such as decision opportunities embedded in R&D projects. To motivate the use of these pricing concepts, we show that the general definitions exhibit several consistency properties. The application of the generalized price definitions to the valuation of R&D projects and decision opportunities embedded in such projects is illustrated through an example.
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MANOLIU, MIHAELA. "STORAGE OPTIONS VALUATION USING MULTILEVEL TREES AND CALENDAR SPREADS." International Journal of Theoretical and Applied Finance 07, no. 04 (June 2004): 425–64. http://dx.doi.org/10.1142/s0219024904002517.
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We present a detailed description of storage options valuation using a multilevel tree methodology which takes into account both the stochastic evolution of the energy commodity price underlying the storage contract or asset, as well as the storage facility operational constraints. We derive also a quasi-analytical solution for the storage value as a strip of calendar spread options, which is applicable when the storage constraints are ignored. The two valuation methodologies are applied within the framework of a one-factor and a two-factor diffusion model for the commodity price. As an interesting example of a path-dependent option with American exercise style, we take a look at the storage option injection and withdrawal exercise price boundaries and examine how these exercise decision boundaries are influenced by variations in the model's input parameters. We provide numerical results illustrating the dependence of the storage option value on the price model parameters, and interpret the observed parameter dependence using the calendar spreads formula as a useful analysis tool. We analyze and present numerical results regarding the dependence of the option value on the storage operational parameters.
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Casler, Darwin J., and Thomas W. Hall. "Firm-Specific Asset Valuation Accuracy Using a Composite Price Index." Journal of Accounting Research 23, no. 1 (1985): 110. http://dx.doi.org/10.2307/2490909.
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Baroni, Michel, Fabrice Barthélémy, and Mahdi Mokrane. "Using rents and price dynamics in real estate portfolio valuation." Property Management 25, no. 5 (October 23, 2007): 462–86. http://dx.doi.org/10.1108/02637470710824739.
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Riley, John Michael, Ted C. Schroeder, Tommy L. Wheeler, Stephen D. Shackelford, and Mohammad Koohmaraie. "Valuing Fed Cattle Using Objective Tenderness Measures." Journal of Agricultural and Applied Economics 41, no. 1 (April 2009): 163–75. http://dx.doi.org/10.1017/s1074070800002613.
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Beef tenderness is critical in consumer satisfaction with beef steak products. Current fed cattle valuation systems do not differentiate carcasses based upon tenderness variation. However, considerable research indicates consumers are willing to pay more for tender relative to tough beef steak. This article develops a tenderness-augmentation to current fed cattle grid pricing systems. Using a large set of actual carcasses, we determine that a tenderness-augmented price grid would reorder fed cattle value by on average nearly $5.00/cwt dressed relative to current valuation methods. Substantial opportunity is present to improve beef tenderness through new price signals to producers.
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Wei, Xing, and Xian Mei. "Poly Real Estate Value Evaluation Research." Applied Mechanics and Materials 687-691 (November 2014): 5075–79. http://dx.doi.org/10.4028/www.scientific.net/amm.687-691.5075.
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This paper made valuation research on poly real estate by combining the actual situation of poly real estate and special factors affecting real estate industry assessment, using relative valuation method p/e ratio method and price-to-book ratio method, and discount cash flow method in absolute valuation method respectively. Three methods valuation results have little difference from the actual price, and are in line with the actual situation. By contrast, two methods valuation results are slightly lower than the actual price, which means that poly still has a certain rise space. From overall analysis, discount cash flow method is more rational comparing with valuation method.
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Suetin, A. "Financial Derivatives Valuation." Voprosy Ekonomiki, no. 10 (October 20, 2007): 125–31. http://dx.doi.org/10.32609/0042-8736-2007-10-125-131.
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The article contains a thorough analysis of the world financial derivatives market with special reference to theoretical issues. It puts forward and traces Black-Scholes options valuation model. The author underlines particularities of advanced practical derivatives price calculation, using the math formula of the Nobel Prize winners. Some practical features of the concept and its implementation within notorious Long-Term Capital Management hedge fund are emphasized.
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Kalczynski, Pawel, and Dawit Zerom. "Price forecast valuation for the NYISO electricity market." Kybernetes 44, no. 4 (April 7, 2015): 490–504. http://dx.doi.org/10.1108/k-08-2014-0174.
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Purpose – Following the deregulation of electricity markets in the USA, independent power producers operate as for-profit entities. Their profit depends on the price of electricity and an accurate forecast is critical in making bidding decisions on the electricity and reserve markets or engaging in bilateral contracts. Competing price forecasts have their accuracy expressed in statistical terms but producers need to determine the long-term value of using a given forecast. The purpose of this paper is to address this issue by presenting a method of electricity price forecast valuation which compares forecast models using financial rather than statistical measures. Design/methodology/approach – The objectives of this paper are achieved by mathematical modeling of thermal power plants and price forecast information available to market participants and simulating the operation of a thermal power plant using various price forecasts and perfect information (as a baseline). The operating profit calculated over a long period was used for ranking forecast models. Findings – The framework can be used to estimate the value of a new price forecast as well as to determine if potential gains from developing or acquiring a new forecast will justify the expenses. The results show that an improvement in terms of statistical forecast accuracy measures does not guarantee increased profit. Practical implications – This paper presents a new method for comparing electricity price forecast models. It can be adapted to various types of thermal power plants that operate on liberalized electricity markets and utilize price-based dynamic economic dispatch models. Originality/value – This paper presents a simulation-based valuation framework for short-term electricity price. The approach described in this paper can be utilized by independent power producers for different types of generators, operating on deregulated electricity markets.
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Tseng, Chung-Li, and Kyle Y. Lin. "A Framework Using Two-Factor Price Lattices for Generation Asset Valuation." Operations Research 55, no. 2 (April 2007): 234–51. http://dx.doi.org/10.1287/opre.1060.0355.
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Greenberg, Doron, Michael Byalsky, and Asher Yahalom. "Valuation of Wind Energy Turbines Using Volatility of Wind and Price." Electronics 10, no. 9 (May 7, 2021): 1098. http://dx.doi.org/10.3390/electronics10091098.
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The limitedness of the nonrenewable local energy resources in Israel, even in the background of the later gas fields’ findings, continues to force the state to devote various efforts towards ‘green’ energy development. These efforts include installations, both for the solar and for wind energy, thus improving the diversity of energy sources. While the standard discounted cash flow (DCF) method using the net present value (NPV) criterion is extensively adopted to evaluate investments, the standard DCF method is inappropriate for the rapidly changing investment climate and for the managerial flexibility in investment decisions. In recent years, the real options analysis (ROA) technique has been widely applied in many studies for the valuation of renewable energy investment projects. Taking into account the above background, we apply, in this study, the real options analysis approach for the valuation of wind energy turbines and apply it to the analysis of wind energy economic potential in Israel, which is the context of our work. We hypothesize that due to nature of wind energy production uncertainties, the ROA method is better than the alternative. The novelty of this paper includes the following: real world wind statistics of the Merom Golan site in Israel (velocity 3.73 m/s, with a standard deviation of 2.03 m/s), a realistic power generation estimation (power generation of 1205.84 kW with a standard deviation of about 0.5% in annual value which is worth about 1.3 M$ per annum), and an economic model to evaluate the profitability of such a project. We thus discuss the existing challenges of diversifying renewable energy sources in Israel by adding wind installations. Our motivation is to introduce a method which will allow investors and officials to take into account uncertainties when deciding in investing in such wind installations. The outcomes of the paper, which are obtained using the method of Weibull statistics and the Black–Scholes ROA technique, include the result that market price volatility adds to the uncertainties much more than any wind fluctuations, provided that the analysis is integrated over a long enough time.
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FUSAI, G., and A. TAGLIANI. "AN ACCURATE VALUATION OF ASIAN OPTIONS USING MOMENTS." International Journal of Theoretical and Applied Finance 05, no. 02 (March 2002): 147–69. http://dx.doi.org/10.1142/s0219024902001389.
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We propose a new method for evaluating fixed strike Asian options using moments. In particular we show that the density of the logarithm of the arithmetic average is uniquely determined from its moments. Resorting to the maximum entropy density, we show that the first four moments are sufficient to recover with great accuracy the true density of the average. Then the Asian option price is estimated with high accuracy. We compare the proposed method with others based on the computation of moments.
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Chan, Kelly. "Equity valuation using benchmark multiples: An improved approach using regression-based weights." Corporate Ownership and Control 13, no. 4 (2016): 483–96. http://dx.doi.org/10.22495/cocv13i4c3p7.
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This paper examine the improvement in multiple-based valuations from using a composite of price to earnings (P/E) and price to book (P/B) ratios and firm-specific regression-based weights. The results support that composite benchmark multiples lead to improved valuations over single multiples and further improvement is achieved by incorporating firm characteristics to derive firm-specific regression-based weights. The unrestricted regression-weighted composite multiples perform better than other approaches in predicting year one to year three share prices. Our results remain unchanged when the analysis is conducted using different estimation regressions, different sample periods and subsamples based on firm size, age and the book to market ratio. This research provides a comprehensive comparison between single, equal-weighted and regression-weighted composite multiples that reflect cross-sectional variations in firm growth, profitability and cost-of-capital in equity valuation. The results highlight the usefulness of composite multiple-based valuation in settings where current market prices are not readily available
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Huang, H. C., and A. J. G. Cairns. "Valuation and Hedging of Limited Price Indexed Liabilities." British Actuarial Journal 10, no. 3 (August 1, 2004): 627–63. http://dx.doi.org/10.1017/s1357321700002713.
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ABSTRACTThis paper considers the market or economic valuation and the hedging of Limited Price Indexed (LPI) liabilities. This involves finding optimal static and dynamic hedging strategies which minimise the riskiness of the investment portfolio relative to the liability.In this paper we do not aim to find the perfect hedge in a perfect world. Instead, it is assumed that optimisation is restricted to three commonly used asset classes in pension funds: cash; long-term (or irredeemable) fixed-interest bonds; and long-dated index-linked bonds. The economic value of the liability is then defined as the value of the best matching portfolio using a mean/variance type of loss function. Specifically, we adopt the risk minimising approach of Föllmer & Sondermann (1986) and Schweizer & Föllmer (1988). Even with such a simple loss function, establishing the theoretically optimal solution can be difficult. We propose that a practical solution close to the theoretical optimum can be found using two approximations. First, we approximate the ‘true’ stochastic economic model by a vector autoregressive model of order one. Second, we use a sequence of linearisations to approximate non-linear by straightforward quadratic minimisation problems.The proposed approach is illustrated with various numerical examples, and we compare the results of the approximately optimal hedging strategy with static strategies.
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Harnida, Muthia. "PENGARUH FAKTOR FUNDAMENTAL TERHADAP PENILAIAN SAHAM PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BURSA EFEK INDONESIA." Al-KALAM JURNAL KOMUNIKASI, BISNIS DAN MANAJEMEN 4, no. 2 (November 27, 2017): 78. http://dx.doi.org/10.31602/al-kalam.v4i2.968.
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The approaches of stock valuation can be used by the investor using the approaches of present value and price earnings ratio. This research is to investigate the effect of fundamental analysis on the stock valuation using the approach of price earnings ratio. The fundamental factor uses some variables such as dividend yield, return on assets, leverage, firm size and growth of earnings per share. The sample is manufacturing companies listed in Indonesian Stock exchange for the period of financial report of 2013 until 2015. The result indicates that statistically dividend yields, leverage, firm size, and return on assets have significant effect on the stock valuation of price earnings ratio, but growth of earnings per share does not affect the stock valuation.
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Vahdatmanesh, Mohammad, and Afshin Firouzi. "Price risk management in BOT railroad construction projects using financial derivatives." Journal of Financial Management of Property and Construction 23, no. 3 (November 5, 2018): 349–62. http://dx.doi.org/10.1108/jfmpc-04-2018-0021.
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Purpose Railroad transit infrastructures are amongst major capital-intensive projects worldwide, which impose significant risks to the contractors of build-operate-transfer projects because of the fluctuations in steel price fluctuation. The purpose of this paper is to introduce a methodology for hedging steel price risk using financial derivatives. Design/methodology/approach Cox–Ross valuation lattice has been used as an option valuation model for determining option’s price for the construction companies involved in fixed-price railroad projects. A sensitivity analysis has been conducted using the financial option Greeks to evaluate the impacts of option’s pricing factors in the total price of option. Findings The result of valuation shows that European options cost to safeguard against the effects of price risk is only a fraction in contrast to the total cost of steel procurement for a typical railroad construction company. This confirms that using this kind of financial derivative is a beneficial yet effective approach for hedging steel price risk for railroad construction companies. Practical implications The applicability of the financial derivatives, both exchange-traded and over-the-counter instruments, is evident in broad financial industry. This paper shows how European options can be readily used for risk management of a typical railroad project, and explains the methodology in a step-by-step procedure. Originality/value Although the financial engineering literature is rife of theory and application of derivatives in various contexts, to the best knowledge of authors there is only few papers on the application of these well-developed financial instruments for risk management in construction industry. This study intends to illustrate how financial derivatives can add value to risky construction projects and shed new light in this important application area.
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Korsgaard, Louise, and Jesper S. Schou. "Economic valuation of aquatic ecosystem services in developing countries." Water Policy 12, no. 1 (November 1, 2009): 20–31. http://dx.doi.org/10.2166/wp.2009.124.
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An important challenge of integrated water resources management (IWRM) is to balance water allocation between different users. While economically and/or politically powerful users have well developed methods for quantifying and justifying their water needs, this is not the case for ecosystems—the silent water user. A promising way of placing aquatic ecosystems on the water agenda is by economic valuation of services sustained by ecosystems. In developing countries, the livelihoods of rural people often depend directly on the provision of aquatic ecosystem services. In such situations, economic valuation of ecosystem services becomes particularly challenging. This paper reviews recent literature on economic valuation of aquatic ecosystem services in developing countries. “Market price” is the most widespread method used for valuating marketed ecosystem services in developing countries. “Cost based” and “revealed preference” methods are frequently used when ecosystem services are non-marketed. A review of 27 existing valuation studies reveals a considerable range of estimated total economic value of aquatic ecosystem services in developing countries, that is from US$30 to 3,000/ha/year. The paper concludes that economic valuation is vital for bringing ecosystems to decision-making agendas in developing countries and that great effort must be made to bridge the gap between scientists and decision makers.
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Kutasi, Dávid, and Milán Csaba Badics. "Valuation methods for the housing market: Evidence from Budapest." Acta Oeconomica 66, no. 3 (September 2016): 527–46. http://dx.doi.org/10.1556/032.2016.66.3.8.
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Different valuation methods and determinants of housing prices in Budapest, Hungary are examined in this paper in order to describe price drivers by using an asking price dataset. The hedonic regression analysis and the valuation method of the artificial neural network are utilised and compared using both technical and spatial variables. In our analyses, we conclude that according to our sample from the Budapest real estate market, the Multi-Layer Preceptron (MLP) neural network is a better alternative for market price prediction than hedonic regression in all observed cases. To our knowledge, the estimation of housing price drivers based on a large-scale sample has never been explored before in Budapest or any other city in Hungary in detail; moreover, it is one of the first papers in this topic in the CEE region. The results of this paper lead to promising directions for the development of Hungarian real estate price statistics.
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Liu, Tzu-Ming, I.-Jean Chen, and Ho-Ching Jenny Yuan. "Using Stated Preference Valuation to Support Sustainable Marine Fishery Management." Sustainability 13, no. 9 (April 26, 2021): 4838. http://dx.doi.org/10.3390/su13094838.
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This study uses a random parameters logit (RPL) model to estimate the Taiwanese preference for northern shrimp (NS) products (NSP) with the Marine Stewardship Council (MSC) label. The estimated results show that, ceteris paribus, the marginal willingness to pay (MWTP) of Taiwanese consumers for NSP with the MSC label is up to New Taiwan dollar (NTD) 84.86 in comparison to products without the label. Moreover, the price of MSC-labeled NSP has a positive effect on the quantity demanded by Taiwanese consumers. They also prefer products in smaller packages and with shorter certification periods. The positive effect can be explained by the Veblen effect or the fact that sometimes prices are perceived as signals of product quality. However, the effects of preference for smaller packages and shorter certification periods are minimal compared with the effects of preference for MSC-labeled products. When consumers are unfamiliar with products or labels, a high price is a viable marketing strategy. However, the advantage cannot sustain the promotion of products and labels.
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Chen, Shen-Yuan. "Valuation of Covered Warrant Subject to Default Risk." Review of Pacific Basin Financial Markets and Policies 06, no. 01 (March 2003): 21–44. http://dx.doi.org/10.1142/s0219091503001018.
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There is no margin settlement mechanism for existing covered warrants in Taiwan, thus the credit risk of the warrant issuer must be considered when investors evaluate the price of a covered warrant. This paper applies the vulnerable option valuation model to empirically study the difference in the theoretical value of a vulnerable warrant, Black–Scholes option price and the market price of warrant by using the Taiwan warrant data. Empirical results show that the theoretical value of a vulnerable warrant is lower than the Black–Scholes non-vulnerable option value and its market value.
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Yoo, Shi Yong. "The Valuation of the Electricity Future Contract Under Weather Uncertainty." Journal of Derivatives and Quantitative Studies 12, no. 2 (November 30, 2004): 127–55. http://dx.doi.org/10.1108/jdqs-02-2004-b0006.
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This paper is concerned with the effects of weather uncertainty on the electricity future curve. Following the approach used by Lucia and Schwartz (2002), the behavior of the underlying spot price is assumed to consist of two components ‘ a totally predictable deterministic component that accounts for regularities in the evolution of prices and a stochastic component that accounts for the behavior of residuals from the deterministic part. The weather uncertainty is modeled consistently with seasonal outlook probabilities from the CPC (Climate Prediction Center) outlook. For a given realization of temperature, the electricity load can be predicted very accurately by a time series model using temperature and other explanatory variables. Furthermore, if temperature and electricity load are known, the spot price can be predicted as well using the regime switching model with time-varying transition probabilities. The electricity future price can be calculated for the given seasonal probabilities from the CPC outlook. Then the electricity future price can be obtained as the arithmetic average of the one-day electricity future price. The future price reflects clearly the response of the spot price to different weather patterns. As the summer gets warmer, the high price regime is more likely to be realized, and as a result, the future price increases.
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Mangale, Chittaranjan, Shyam Meena, and Preetesh Purohit. "Fuzzy Logic based Stock Value Prediction using Fundamental Analysis." Oriental journal of computer science and technology 10, no. 1 (March 16, 2017): 120–26. http://dx.doi.org/10.13005/ojcst/10.01.16.
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Stock market is very versatile and fluctuates with time. For the same way it becomes difficult to predict movement of the stock, there are various approaches and tools through which the price of the stock is determined by the past patterns. Mostly the approaches are in terms of fundamental approach and technical approach. For the long-term valuation fundamental approach is used. Every stock is having its own value that does not depend on the price of the stock that is known as Intrinsic value. The proposed model works through phases of data collection, feature processing, fuzzy logic mapping and stock value calculation. Fuzzy logic is used to map the quality as well as quantity valuation factors. The IF THEN rules are applied on the linguistic variable. The fuzzy model outcomes the stock value which is used to provide stock worth. The stock value is calculated by Dividend discount model. Accuracy of the system is 0.77. The results offer the backbone for the value and not the price.
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HINZ, JURI, and MARTINA WILHELM. "PRICING FLOW COMMODITY DERIVATIVES USING FIXED INCOME MARKET TECHNIQUES." International Journal of Theoretical and Applied Finance 09, no. 08 (December 2006): 1299–321. http://dx.doi.org/10.1142/s0219024906004001.
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In this work, the valuation of energy-related financial contracts written on prices of flow commodities (such as natural gas, oil and electrical power) will be elaborated. Due to restrictions on storability of the underlying, the pricing of flow commodity derivatives is not trivial and thus correct valuation is still under discussion. In this paper, an axiomatic setting is followed, which provides a connection to interest rate theory, whose toolkit we utilize to consistently price frequently quoted flow commodity options such as caps, floors, collars and cross commodity spreads.
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Andor, György, and Gábor Bóta. "Cash flow estimation for real option analysis using Margrabe's model." Acta Oeconomica 56, no. 2 (June 1, 2006): 183–94. http://dx.doi.org/10.1556/aoecon.56.2006.2.3.
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This paper looks at how the parameters for real option analysis can be extracted from the general capital budget of a project and discusses how the estimated cash flows of a general project can be used for a real option analysis. A project is described where it is possible to stop the business operation in case of predicting a loss for the next year. Our model shows how the cash flow of the period influenced by the option-like decision has to be separated in order to get the exercise price and the price of the underlying asset for real option valuation. Besides providing arguments against the suitability of the general Black-Scholes formula for real option situations, the paper also shows how Margrabe's exchange option valuation formula may be used, and how the volatility as a parameter of this model can be calculated from the data available about the project.
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Chen, Changping, Don E. Ethridge, and Stanley M. Fletcher. "Textile Manufacturers' Market Valuation of Cotton Fiber Attributes." Journal of Agricultural and Applied Economics 29, no. 1 (July 1997): 185–95. http://dx.doi.org/10.1017/s1074070800007665.
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AbstractThis study provides an analysis of the price-quality relationships of U.S. cotton using primary data collected from textile manufacturers, the end users of fiber. Hedonic prices of fiber attributes are estimated for three production regions—West, South Central, and South—over the 1992–95 study period. Results indicate that cotton price is determined by quality attributes and nonquality factors in the end-use market. There are similarities and differences in valuation of fiber attributes based on region of origin of the cotton.
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Macias, Washington, and Katia Rodriguez. "Brand Valuation by Price Premium: Theoretical Explanation and Practical Application Using Conjoint Analysis." Knowledge Management: An International Journal 17, no. 3 (2018): 13–27. http://dx.doi.org/10.18848/2327-7998/cgp/v17i03/13-27.
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이재윤, Hyungil Kwon, and 백주해. "Reexamination on the recommended price of National Fitness Award using contingent valuation method." Korean Journal of Sport Science 29, no. 4 (December 2018): 626–38. http://dx.doi.org/10.24985/kjss.2018.29.4.626.
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Carriere, Jacques F. "Valuation of the early-exercise price for options using simulations and nonparametric regression." Insurance: Mathematics and Economics 19, no. 1 (December 1996): 19–30. http://dx.doi.org/10.1016/s0167-6687(96)00004-2.
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HIRONO, Keiko Nosse. "Appropriate Valuation of Housing Using a Hedonic Price Function and Disclosure of Information." Studies in Regional Science 34, no. 1 (2003): 397–410. http://dx.doi.org/10.2457/srs.34.397.
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Lee, Sanghyo, Hyeongjae Jang, and Yonghan Ahn. "Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model." Advances in Civil Engineering 2018 (October 29, 2018): 1–9. http://dx.doi.org/10.1155/2018/2989343.
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This study assessed the levels of risk that contractors may be subject to while executing a GMP contract by applying a collar option model to the case study of an apartment project in Korea and identified implications for the application of GMP contracts in Korea. The payoff structure of the GMP contract was defined based on the collar option model and a profit sharing ratio calculated to evaluate the risks involved in GMP contracts. The results showed that an increase in the GMP and a decrease in the expected cost and cost range were accompanied by a decrease in the profit sharing ratio. The proposed valuation model for GMP contracts is expected to help clients and contractors in Korea negotiate reasonable contracts as it enables the contractor to utilize the proposed model as basic data, the client to evaluate the performance of the contractor, and both parties to agree a reasonable profit sharing ratio. Implementing GMP contracts with CMR is likely to have a number of positive effects on the Korean construction market. However, in order to maximize these effects, it is necessary to have the ability to evaluate cost uncertainty. Accordingly, it is very important to analyze the factors that influence cost volatility. In future work, the various factors that have an impact on the GMP must be studied to maximize the positive effects of the framework proposed in this paper. An analysis of the effect of each factor on the change in the GMP will help Korean construction companies who are attempting to introduce GMP contracts to perform their preconstruction services effectively.
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Dorion, Christian. "Option Valuation with Macro-Finance Variables." Journal of Financial and Quantitative Analysis 51, no. 4 (August 2016): 1359–89. http://dx.doi.org/10.1017/s0022109016000442.
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I propose a model in which the price of an option is partly determined by macro-finance variables. In an application using an index of current business conditions, the new model outperforms existing benchmarks in fitting underlying asset returns and in pricing options. The model performs particularly well when business conditions are deteriorating. Using the recent financial crisis as an out-of-sample experiment, the new model has option-pricing errors that are 18% below those of a nested 2-component volatility benchmark. Results are robust to using alternative business conditions proxies and comparing to different benchmark models.
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Goundar, Sam, and Akashdeep Bhardwaj. "Property Valuation Using Linear Regression and Random Forest Algorithm." International Journal of System Dynamics Applications 10, no. 4 (October 2021): 1–16. http://dx.doi.org/10.4018/ijsda.20211001.oa13.
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The economic boom over the recent past and the quest to further develop, has made several nation states the business hubs in their regions. Along with the investments, there has been growth in the number of property sales. Social media has become convenient platform of choice for advertising property sales after the introduction of Web 2.0. This article utilizes social media platforms like Facebook to scrape data from user groups advertising properties and then using data mining techniques and approaches to determine true valuation of properties. This methodology is based on set attributes, in the urban areas by looking at the property sales of the recent past within the same area. This enables investors interested in these properties and provides a fair idea of price of properties based on the key attributes associated with the respective property.
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Banerjee, Arindam. "Do Valuation (P/E, ROE and P/BV) Ratios Drive Stock Values? A Case of GCC Countries." International Journal of Accounting and Financial Reporting 9, no. 2 (April 15, 2019): 362. http://dx.doi.org/10.5296/ijafr.v9i2.14848.
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Do valuation ratios predict the future stock prices? Over the decades, researchers have explored data across various global financial markets and across different timelines to seek its unique answer. The results though were not universal, resulted in generating greater interest in the subject. Using valuation ratios as a stock price predictor gained further momentum after Campbell and Shiller’s seminal work involving a century of data sets. In spite of its practical relevance, not much effort was being made to establish the correlation between valuation ratios and stock price of GCC listed companies. This paper attempts to bridge the existing gap by studying 140 publicly listed companies in the six GCC countries namely Qatar, Kuwait, Bahrain, Saudi Arabia, Oman and United Arab Emirates (UAE) using the multiple regression model. The period of study was between 2013-2017. Correlation is established for each of the countries individually, followed by an integrated approach. The independent variables used in the study are Price Earnings Ratio (P/E), Return on Equity (ROE), Price to Book Ratio (P/BV) and Stock Returns being the dependent variable.
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Ivanovski, Zoran, Zoran Narasanov, and Nadica Ivanovska. "Performance Evaluation of Stocks’ Valuation Models at MSE." Economic and Regional Studies / Studia Ekonomiczne i Regionalne 11, no. 2 (June 1, 2018): 7–23. http://dx.doi.org/10.2478/ers-2018-0011.
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Abstract Subject and purpose of work: The main task of this paper is to examine the proximity of valuations generated by different valuation models to stock prices in order to investigate their reliability at Macedonian Stock Exchange (MSE) and to present alternative “scenario” methodology for discounted free cash flow to firm valuation. Materials and methods: By using publicly available data from MSE we are calculating stock prices with three stock valuation models: Discounted Free Cash Flow, Dividend Discount and Relative Valuation. Results: The evaluation of performance of three stock valuation models at the MSE identified that model of Price Multiplies (P/E and other profitability ratios) offer reliable stock values determination and lower level of price errors compared with the average stocks market prices. Conclusions: The Discounted Free Cash Flow (DCF) model provides values close to average market prices, while Dividend Discount (DDM) valuation model generally mispriced stocks at MSE. We suggest the use of DCF model combined with relative valuation models for accurate stocks’ values calculation at MSE.
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Soundararaj, B., and C. Pettit. "USING EYE-TRACKING TO SUPPORT BIG DATA DRIVEN PROPERTY VALUATION TOOLS." International Archives of the Photogrammetry, Remote Sensing and Spatial Information Sciences XLVI-4/W1-2021 (September 3, 2021): 111–14. http://dx.doi.org/10.5194/isprs-archives-xlvi-4-w1-2021-111-2021.
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Abstract. Building and using large scale, Automated Valuation Models (AVM) is one of the key multi-disciplinary pursuits in the study of cities and their economies. The methods used in building these AVMs such as ‘hedonic price modelling’ require a ‘co-design’ approach which needs significant collaboration and feedback between the modellers and the users of these models. The success of this collaborative approach depends crucially on our ability to capture the inputs and feedback from users without the bias and uncertainties present in traditional data collecting methods. In this paper, we explore and demonstrate the use of ‘eye-tracking’ technology in devising an objective methodology for collecting user feedback for co-design exercises. We employed a remote eye tracker in conjunction with traditional questionnaires to capture the decision making process of participants as buyers while selecting a property among a set of available options. We then compared the factors they reported to be important in their decision-making process to the factors they actually considered when looking at property listings. In our experiments, we found that pictures and maps captured more than 95% of the attention from buyers compared to the descriptive or statistical information showing the significance of the interface and medium of the valuation process. When responding to questionnaires, participants as property buyers reported that the attributes of a property such as number of beds, baths, quality of construction from pictures and location are equally important in selecting one over others. In contrast, when measured by an eye-tracker, we found that the participants gave significantly more attention to the quality of construction and location of the property compared to other factors. These preliminary results, though not definitive, demonstrate the value and usefulness of eye-tracking as a technique for capturing and measuring the factors that influence the desirability and in turn the price of a property. This methodology when controlled for characteristics of the participants, the properties and the medium of communication has the potential to help us to identifying and quantifying the relevance of parameters during property valuation and hence improve the accuracy and effectiveness of the corresponding hedonic price models.
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Du Toit, S. G., and J. D. Krige. "The price-to-book effect on the JSE: Valuation disparities and subsequent performance." South African Journal of Business Management 45, no. 4 (December 31, 2014): 93–99. http://dx.doi.org/10.4102/sajbm.v45i4.143.
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The purpose of this study was to determine whether the relative out- or underperformance of a value portfolio versus a growth portfolio can be anticipated in advance by comparing a valuation difference multiple with the subsequent fiveyear relative performance of the value and growth portfolios. The valuation difference multiple was calculated as the median price-to-book value (P/B) ratio of the growth portfolio divided by the median P/B ratio of the value portfolio. Using monthly data for the period 1991 to 2011, this study found that in most instances the higher the valuation difference multiple, the higher the outperformance of the value portfolio over the subsequent five-year period, as compared to the growth portfolio.