An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks

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An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks. / Nyegaard, Anna Kamille; Ott, Johan Raunkjaer; Steffensen, Mogens.

I: Mathematics, Bind 9, Nr. 13, 1520, 2021.

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Harvard

Nyegaard, AK, Ott, JR & Steffensen, M 2021, 'An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks', Mathematics, bind 9, nr. 13, 1520. https://doi.org/10.3390/math9131520

APA

Nyegaard, A. K., Ott, J. R., & Steffensen, M. (2021). An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks. Mathematics, 9(13), [1520]. https://doi.org/10.3390/math9131520

Vancouver

Nyegaard AK, Ott JR, Steffensen M. An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks. Mathematics. 2021;9(13). 1520. https://doi.org/10.3390/math9131520

Author

Nyegaard, Anna Kamille ; Ott, Johan Raunkjaer ; Steffensen, Mogens. / An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks. I: Mathematics. 2021 ; Bind 9, Nr. 13.

Bibtex

@article{d366186aa3484546b348c74bea41f50c,
title = "An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks",
abstract = "We formulate a claim valuation problem where the dynamics of the underlying asset process contain the claim value itself. The problem is motivated here by an equity valuation of a firm, with intermediary dividend payments that depend on both the underlying, that is, the assets of the company, and the equity value itself. Since the assets are reduced by the dividend payments, the entanglement of claim, claim value, and underlying is complete and numerically challenging because it forms a forward–backward stochastic system. We propose a numerical approach based on disentanglement of the forward–backward deterministic system for the intrinsic values, a parametric assumption of the claim value in its intrinsic value, and a simulation of the stochastic elements. We illustrate the method in a numerical example where the equity value is approximated efficiently, at least for the relevant ranges of the asset value.",
keywords = "Corporate finance, Forward–backward stochastic differential equations, Intrinsic value, With-profit insurance",
author = "Nyegaard, {Anna Kamille} and Ott, {Johan Raunkjaer} and Mogens Steffensen",
note = "Publisher Copyright: {\textcopyright} 2021 by the authors. Licensee MDPI, Basel, Switzerland.",
year = "2021",
doi = "10.3390/math9131520",
language = "English",
volume = "9",
journal = "Mathematics",
issn = "2227-7390",
publisher = "MDPI AG",
number = "13",

}

RIS

TY - JOUR

T1 - An intrinsic value approach to valuation with forward–backward loops in dividend paying stocks

AU - Nyegaard, Anna Kamille

AU - Ott, Johan Raunkjaer

AU - Steffensen, Mogens

N1 - Publisher Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland.

PY - 2021

Y1 - 2021

N2 - We formulate a claim valuation problem where the dynamics of the underlying asset process contain the claim value itself. The problem is motivated here by an equity valuation of a firm, with intermediary dividend payments that depend on both the underlying, that is, the assets of the company, and the equity value itself. Since the assets are reduced by the dividend payments, the entanglement of claim, claim value, and underlying is complete and numerically challenging because it forms a forward–backward stochastic system. We propose a numerical approach based on disentanglement of the forward–backward deterministic system for the intrinsic values, a parametric assumption of the claim value in its intrinsic value, and a simulation of the stochastic elements. We illustrate the method in a numerical example where the equity value is approximated efficiently, at least for the relevant ranges of the asset value.

AB - We formulate a claim valuation problem where the dynamics of the underlying asset process contain the claim value itself. The problem is motivated here by an equity valuation of a firm, with intermediary dividend payments that depend on both the underlying, that is, the assets of the company, and the equity value itself. Since the assets are reduced by the dividend payments, the entanglement of claim, claim value, and underlying is complete and numerically challenging because it forms a forward–backward stochastic system. We propose a numerical approach based on disentanglement of the forward–backward deterministic system for the intrinsic values, a parametric assumption of the claim value in its intrinsic value, and a simulation of the stochastic elements. We illustrate the method in a numerical example where the equity value is approximated efficiently, at least for the relevant ranges of the asset value.

KW - Corporate finance

KW - Forward–backward stochastic differential equations

KW - Intrinsic value

KW - With-profit insurance

UR - http://www.scopus.com/inward/record.url?scp=85109386552&partnerID=8YFLogxK

U2 - 10.3390/math9131520

DO - 10.3390/math9131520

M3 - Journal article

AN - SCOPUS:85109386552

VL - 9

JO - Mathematics

JF - Mathematics

SN - 2227-7390

IS - 13

M1 - 1520

ER -

ID: 284413201