Cashflow-at-Risk (C-FaR) is an attempt to create an analogue to Value at Risk (VaR) that can be used by non-financial firms to quantify various kinds of risk exposures, including interest rate, exchange rate, and commodity price risks. There are two basic ways to attack this problem. One is from...

The classic approach to capital budgeting based on the standard Capital Asset Pricing Model (CAPM) says that the hurdle rate (or cost of capital) for any new project or investment should depend only on the riskiness of that investment. Thus, the hurdle rate, and hence the expected value of the...