Showing 1 - 10 of 23
Persistent link: https://www.econbiz.de/10013418022
A common method of valuing the equity in leveraged transactions is the flows-to-equity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as...
Persistent link: https://www.econbiz.de/10009354137
We introduce and study no-good-deal valuation bounds defined in terms of expected utility. A utility-based good deal is a payoff whose expected utility is toohigh in comparison to the utility of its price. Forbidding good deals induces, viaduality, restrictions on pricing kernels and thereby...
Persistent link: https://www.econbiz.de/10005857734
We study the exponential utility indifference valuation of a contingent claim B in an incomplete market driven by two Brownian motions. The claim depends on a nontradable asset stochastically correlated with the traded asset available for hedging. We use martingale arguments to provide upper and...
Persistent link: https://www.econbiz.de/10005857735
We introduce heterogeneity in agents’ risk aversion into a general equilibrium asset pricing framework with recursive preferences. Agents trade in a stock, whose dividend is the only source of consumption, and in a short-term bond in zero net supply. In equilibrium the less risk averse agents...
Persistent link: https://www.econbiz.de/10005857761
This study finds that a model with internal habit memory allowsto simultaneously explain a series of business cycle and asset pricing puzzles. Compared to the literature, the equity premium puzzle can be resolved in a model with endogenous labor, without giving rise to excessive risk free rate...
Persistent link: https://www.econbiz.de/10005858035
We examine merger activity and its effect on asset pricing in a firm network economy. Mergers create internal capital markets which change the cash flow risk structure of the merging firms. We propose a solution concept for coalitional games without the superadditivity axiom, which extends...
Persistent link: https://www.econbiz.de/10005858047
Control problems with Recursive Multiple-Priors Utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...
Persistent link: https://www.econbiz.de/10005858066
This paper introduces an expected value estimator with expert knowledge to the robust estimation of sovereign rating transitions which are characterised by few observations. Ourestimates of default premia within Mexican, Colombian and Brazilian Eurobond yield spreads provide a better fit than...
Persistent link: https://www.econbiz.de/10005858202
The aim of this study is to develop a general equilibrium framework linking real estate prices to the real economy. The model is evaluated in terms of its ability to explain: (i) the high volatility of residential real estate prices, (ii) the fact that commercial real estate prices are more...
Persistent link: https://www.econbiz.de/10005858247