The study examines model risk in real option valuation methods.
problem Model risk in real option valuation methods.
method A decision tree framework to value options to invest or divest in projects.
result Real option values can decrease with volatility and increase with investment costs, contrary to previous literature.
DBOT uses AI to automate long-term stock valuation.
problem Automating long-term stock valuation using AI.
method DBOT uses generative AI to reason about company valuations.
result DBOT can value any publicly traded company and is comparable to Aswath Damodaran.
Model investor risk preferences to adjust real option valuation.
problem Investor risk preferences impact real option valuation.
method Model investor heterogeneity with different required returns, discounting cash flows with investor and market rates.
result Risk-adjusted valuation model facilitates subjective decision making.
This study examines how risky investments affect insurance capital valuation.
problem Standard cost-of-capital assumptions do not account for risky investments.
method Analyzed effects of allowing buffer capital investments in risky assets.
result Decomposition of buffer capital contributions varies with riskiness.
Framework optimizes PV-battery investment timing to maximize value.
problem Optimizing investments in residential PV-battery systems under uncertain market conditions.
method Real options valuation framework with multi-stage compound options, incorporating Monte Carlo simulation.
result Optimal timing of PV-battery investment increases overall value.
Integrates ESG factors into Bachelier's model for asset pricing.
problem Incorporating ESG factors into classical finance models.
method Defines ESG price process and integrates into Bachelier's model.
result Enables option pricing valuation with ESG factors.
Study evaluates early-stage cybersecurity firms' performance using Crunchbase data.
problem Assessing performance of early-stage cybersecurity startups.
method Empirical analysis of 19 cybersecurity sectors using Crunchbase data.
result Significant variations in capital raised and post-money valuations across cybersecurity sectors.
Study optimizes investment and claim valuation with transaction costs and disutility.
problem Optimizing contingent claim valuation with transaction costs and disutility.
method Dual representation and dynamic procedure for solving disutility minimization problem, leading to efficient numerical procedures.
result Efficient and convergent numerical procedures for indifference pricing, optimal trading strategies, and shadow prices.
This study improves valuation of post-revenue biopharmaceutical assets using Pfizer's data.
problem Accurate valuation of post-revenue drug assets in biotech and pharma.
method Historical sales data analysis to forecast future sales and calculate Net Present Value.
result Demonstrates a method for more informed investment decisions in biotech and pharma.
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself. Yields vary across different investment opportunities and their interrelations are …
Business cycles affect startup valuations, both directly and indirectly.
problem How do business cycles impact startup valuations?
method Structural Equation Model approach using a dataset of 1,089 venture capital investments.
result Business cycles impact startup valuations both directly and indirectly.
This work simplifies data valuation for LLMs using Shapley value computation.
problem How to fairly distribute benefits from training superior LLMs with multiple data owners' resources.
method We leverage the specific mathematical structure of DPO to enable scalable Shapley value computation for LLMs.
result We demonstrate that Shapley value computation for LLMs trained with DPO is significantly simplified.
We propose a new method of valuation of portfolios and their respective investing strategies. To this end we define a canonical ensemble of portfolios that allows to use the formalism thermodynamics.
Value-tracking in financial markets breaks down when non-valuation-based traders dominate.
problem Understanding the threshold for value-tracking in financial markets.
method Simple discrete-time model to show how non-valuation-based traders can cause tracking errors.
result A threshold above which value-tracking breaks down without changes in asset value.
Study analyzes Nifty 50 returns over 34 years, showing P/E ratio predicts long-term gains.
problem Understanding equity return dynamics in the Indian market over various horizons.
method Unified, distribution-aware, complexity-informed framework using 34 years of Nifty 50 data.
result P/E ratio probabilistically maps return distributions across different investment horizons.
An Ensemble Anomaly Detection Framework for Risk Calculation Integrity
problem Detecting errors in risk valuation outputs
method Ensemble Quality Assessment Framework (EQAF)
result Achieves F1 scores of 61-79% across four datasets
In the aftermath of the 2007 global financial crisis, banks started reflecting into derivative pricing the cost of capital and collateral funding through XVA metrics. Here XVA is a catch-all acronym whereby X is replaced by a letter such as C for credit, D for debt, F for funding, K for capital and so on, and VA stands…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a number of properties are proved and discussed. Special attention is given to the c…
Study reveals which startup valuation factors are most critical.
problem Understanding the complex factors influencing startup valuations.
method Hierarchical prediction models using decision trees and random forests.
result Identifies which factors most significantly impact startup valuations.
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions decompose into tree terms, corresponding to the agent's risk preferences, tradi…
Paper develops framework for valuing and assessing credit risk in renewable PPAs.
problem Renewable PPAs expose both parties to counterparty credit risk.
method Modelled joint dynamics of electricity prices and renewable output, incorporated default probabilities.
result Provides transparent metric for PPA valuation under counterparty risk.
The study improves stock market valuation using volatility and earnings data.
problem Improving stock market valuation metrics.
method Time series model for asset returns, multivariate kernel density estimation, linear regression.
result The valuation measure is an improvement over Shiller's P/E ratio.
Framework for realistic insurance liability valuation.
problem Economic realism in insurance liability valuation.
method Replication approach of no-arbitrage theory, considering capital and fulfillment conditions.
result Identifies conditions for market price recovery and extends production for insolvency.
The paper presents formulas for valuing debt and equity in interconnected firms with comonotonic endowments.
problem Valuation of debt and equity in interconnected firms with comonotonic endowments.
method Formulas derived under comonotonic setting, demonstrating lower and upper bounds using Jensen's inequality.
result The comonotonic setting provides a lower bound and Jensen's inequality an upper bound to the price of debt.
Proposes a tuning-free dynamic pricing method for linear valuation models.
problem Dynamic pricing in linear valuation models with unknown market noise distribution.
method Shape-constrained isotonic regression under weaker Hölder continuity assumptions.
result Demonstrates lower empirical regret compared to existing methods.
Dolby has the best financial health, but competition for patents could create jobs.
problem Comparing stock valuation of companies using financial metrics.
method Analysis of financial statements over three years.
result Dolby has stable profit margins and generates billions in revenue.
This paper evaluates investment risks in LATAM AI startups using DCF method.
problem Unique challenges and risks faced by LATAM tech startups.
method Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) metrics; Discounted Cash Flow (DCF) method.
result Developed a ranking of emerging powers in Latin America for tech startup investment.
Studies report that firms do not invest in cost-effective green technologies. While economic barriers can explain parts of the gap, behavioural aspects cause further under-valuation. This could be partly due to systematic deviations of decision-making agents' perceptions from normative benchmarks, and partly due to the…
Enhances robo-advisors with client investment preference inference.
problem Accurately inferring clients' investment preferences from past activities.
method Stochastic control framework with continuous-time model and discounting scheme.
result Proves sufficient conditions for client investment preference identifiability.
On a daily investment decision in a security market, the price earnings (PE) ratio is one of the most widely applied methods being used as a firm valuation tool by investment experts. Unfortunately, recent academic developments in financial econometrics and machine learning rarely look at this tool. In practice, fundam…
New method preserves option structure while using neural networks for volatility.
problem Inconsistent exotic option prices with model calibration.
method Volatility Feature Approach (VFA) using neural networks.
result VFA outperforms model calibration approach for practical volatility surfaces.
This memoir presents a systematic study of the utility maximization problem of an investor in a constrained and unbounded financial market. Building upon the work of Hu et al. (2005) [Ann. Appl. Probab., 15, 1691--1712] in a bounded framework, we extend our analysis to the more challenging unbounded case. Our methodolo…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from derivatives theory to price such contracts. Numerical simulations are used to demonstrate…
Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must be quantified. CPPI strategies are path-dependent and may have American exercise…
The study finds significant financial sector volatility and tail risk spillovers to real economy sectors.
problem Volatility and tail risk spillovers from financial to real economy sectors.
method New measure of tail risk spillover, empirical analysis of U.S. economy 2001-2011.
result Significant volatility and tail risk spillovers from financial to real economy sectors, especially during crises.
This study examines representation bias in open-source Qwen models for investment decisions.
problem Representation bias in financial applications of large language models.
method Balanced round-robin prompting over 150 U.S. equities, constrained decoding, token-logit aggregation.
result Firm size and valuation increase model confidence, while risk factors decrease it.
Optimal trading strategy in Proof-of-Stake blockchain using continuous-time control.
problem Finding the optimal balance between stake utility and consumption utility in Proof-of-Stake blockchain.
method Continuous-time control approach, dynamic programming, Hamilton-Jacobi-Bellman (HJB) equations.
result Close-form solutions for linear and convex utility functions, optimal strategies identified.
This paper optimizes crypto portfolios and valuates crypto options.
problem High volatility and lack of standard pricing models for crypto assets.
method Optimization techniques to minimize tail risk, dynamic pricing model for crypto assets, Esscher transform for fair valuation.
result Optimized crypto portfolios outperform major stock indices.
Paper evaluates whether AI is a bubble or a productivity revolution.
problem Determining if AI investments are a bubble or a sustainable technology.
method Hybrid review and diagnostic framework combining asset pricing foundations and modern econometric methods.
result AI investments show both genuine fundamentals and bubble-like fragilities.
Examines three methods to estimate equity risk premium.
problem Estimating the equity risk premium in finance.
method Survey-based, historical stock premia, and Implied Equity Risk Premium.
result Shows results of estimating ERP using Implied Equity Risk Premium method.
In this paper, we extend the jump-diffusion model proposed by Davis and Lleo to include jumps in asset prices as well as valuation factors. The criterion, following earlier work by Bielecki, Pliska, Nagai and others, is risk-sensitive optimization (equivalent to maximizing the expected growth rate subject to a constrai…
Study finds financial constraints explain zero-leverage firms.
problem Why some firms have zero leverage despite various explanations.
method Examined three measures of financial constraints; analyzed firms' behavior before and after levering.
result Firms are financially constrained, not due to managerial entrenchment or market valuation.
Study uses web search data to analyze tech startups growth.
problem Analyzing growth dynamics of tech startups.
method Utilized Google Trends data for 241 US-based tech startups.
result Web search traffic correlates positively with tech startup growth.
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities which incorporates the Solvency II approach as a special case. The proposed fram…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which changes with the regime. The market model is incomplete and there are two risky asset…
The paper optimizes portfolios by selecting financial ratios via PCA for better value investment.
problem Embedding value investment in portfolio optimization models.
method Principal Component Analysis (PCA) to filter out dominant financial ratios, then applying portfolio optimization model with second-order stochastic dominance criteria.
result PCA-SPO(B) strategy outperforms other models in terms of downside deviation, CVaR, VaR, Sortino, Rachev, and STARR ratios.
Introduces GA-P/E, a growth-adjusted stock valuation measure.
problem Evaluating stock value and predicting future returns.
method Computes a payback period adjusted for earnings growth, using a sorted portfolio methodology.
result Low GA-P/E stocks outperform high GA-P/E stocks in absolute and risk-adjusted returns.
Examines climate financing for renewable energy projects using structured funds.
problem Valuation of structured climate financing on diverse renewable energy asset pools.
method Bottom-up Gaussian copula framework with LH++ model for diversification analysis.
result Shows how the mix of indirect and direct RE investments affects the sensitivity of the senior tranche.