This paper shows that future tax savings from a tax loss carryforward equal a portfolio of options based on the taxable base. Unfortunately, the assumption of a geometric Brownian motion is not applicable for the taxable base since it implies that a positive taxable base, for example, will never...

Tax loss carry-forwards are a valuable asset because they reduce a company's future tax payments. However, there is often a great deal of uncertainty regarding the probability and timings of these tax savings. We propose a contingent-claim model to value this asset. The value is determined...