A Correlation Pricing Formula1
نویسنده
چکیده
In strict terms, the Capital Asset Pricing Model applies only to marketed assets, but the CAPM is frequently used to assign prices to nonmarketed assets as well. The Correlation Pricing Formula (CPF) is similar in form to the CAPM, and gives the same result. However, the CPF expresses the price of a nonmarketed asset in terms of a priced asset that is most correlated with the nonmarketed asset, rather than in terms of the market portfolio. This method is a rigorous version of the common practice of assigning a price to a new asset by considering prices of comparable marketed assets. The method sometimes has accuracy advantages when values in the formula must be estimated.
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