Editorial Type:
Article Category: Research Article
 | 
Online Publication Date: 01 Dec 2016

A General Option Valuation Approach to Discount for Lack of Marketability

PhD
Page Range: 135 – 148
DOI: 10.5791/BVR-D-16-00008.1
Save
Download PDF

A general option-based approach to estimating the discount for lack of marketability is offered. It is general enough to capture maturity, volatility, hedging availability, and investor skill, as well as other important factors. The model is shown to contain several option-based models as special cases. The model also contains two weighting variables that provide valuation professionals much needed flexibility in addressing the unique challenges of each nonmarketable valuation assignment. Selected prior empirical results are reinterpreted with this approach.

Copyright: © 2016, American Society of Appraisers
Figure 1
Figure 1

Comparison of Finnerty's Model (Fin), Plain-Vanilla Put Model (PVPut), and Longstaff's Lookback Put Model (LLB), where 30%, 40%, and 50% Denote Input Volatility of the Underlying Instrument


Figure 1
Figure 1

Continued


  • Download PDF