Mergers and market valuation: real options approach

mergers and market valuation: real options approach

this paper investigates the connection between market valuation anda type of the merger (stock, cash) using real options setup. i solveexplicitly for the timing and terms of cash mergers in two deferent settingsto demonstrate that cash mergers generally occur at low marketvaluations, whereas stock mergers that may be observed at both low andhigh valuations; the result holds with some dierences...

Real Options Valuation: a Monte Carlo Approach

This paper provides a new approach for valuing a wide set of capital budgeting problems with many embedded real options dependent on many state variables and a related valuation algorithm based on Monte Carlo simulation. The valuation approach decomposes of a complex real option problem with many options into a set of simple options, but taking into account deviations from value additivity due ...

Market Valuation of Firms’ Technological Knowledge: A Real Options Perspective

The Real OpTiOns appROach TO ValuaTiOn: challenges and OppORTuniTies*

doi 10.7764/LAJE.50.2.163 * This lecture was delivered at the 2013 Finance UC Conference in Santiago, Chile. Hay Jin Kim provided valuable assistance. ** California Chair in Real Estate and Land Economics Professor of Finance, Anderson School of Management, University of California, Los Angeles. Email: [email protected]. The Real OpTiOns appROach TO ValuaTiOn: challenges and Op...

Market Valuation and Employee Stock Options

This paper investigates a market-valuation-based hypothesis for employee stock options (ESOs). It examines how market valuation has affected the decision to grant ESOs, the amount of options granted, and the distribution of options among executives and rankand-file employees. I find strong empirical evidence that firms with high market valuation and high probability of future overvaluation are ...

Real options valuation under uncertainty

In this paper we develop a novel valuation model and methodology to value a pharmaceutical R&D project based on real options approach. The real options approach enables the possibility of optimally abandon the project before completion whenever the investment cost turns out to be larger than the expected net cash flow stream. On the other hand, the proposed model accounts for two different sour...