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Artificial Neural Networks (ANNs) has been used as a powerful modeling technique for forecasting. In this study, the relationship between multiples and stock prices has been investigated on the Pakistan Stock Exchange 100 Index by incorporating financial modeling through neural network. The aim is to develop multiple-based valuation model to check whether multiples are viable factor in predicting stock movements. Forecasting model has been developed by using neural network. Prediction accuracy of the developed forecasting model has been evaluated. Findings reveal that neural network outperforms in comparison to linear regression and forecasts stock prices with 98% accuracy.

For a Henselian valued field $(K,v)$ we establish a complete parallelism between the arithmetic properties of irreducible polynomials $F\in K[x]$, encoded by their Okutsu frames, and the valuation-theoretic properties of their induced valuations $v_F$ on $K[x]$, encoded by their Mac Lane–Vaquié chains. This parallelism was only known for defectless irreducible polynomials.

People's common propensity to value losses more than otherwise commensurate gains, gives rise to different values of positive and negative changes in entitlements depending on the measure used to assess them. A major implication of the differing valuations is a need to choose an appropriate measure for particular changes. The appropriate choice of measure appears to turn on the reference state that people use to weigh the values of gains and losses: the distinction between the compensating and equivalent variation measures of values. If people view the present state as expected and normal, then the compensating measures apply; the equivalent variation measures are appropriate if they view the changed state as the reference.

We show that every state ω on a lattice effect algebra E induces a uniform topology on E. If ω is subadditive this topology coincides with pseudometric topology induced by ω. Further, we show relations between the interval and order topology on E and topologies induced by states.

This paper examines the performance of Silicon Valley ventures with Asian-American founding teams. We review some challenges faced by these ventures, compare their performance with that of other ventures, and analyze the impact of strategic partnerships on their performance. Our results indicate that firms founded by Asian American entrepreneurs tend to require more time to reach initial public offering (IPO) status than do other ventures in Silicon Valley. Our results further show that, despite needing this extra time, Asian American-founded ventures significantly outperformed their counterparts in 12-month post-IPO share price gain. This superior short-term post-IPO performance suggests that Asian American firms, particularly those that lacked relationships with U.S.-based strategic investors, might have been undervalued prior to and at IPO.

This paper presents a general approach to deriving valuation models and the relevant cost of capital formulas independent of a particular tax environment. The value of a levered firm depends to a large extent upon the amount and value of the tax shields. The latter in turn differs from country to country and even from firm to firm, depending on its particular situation. It is subject to change with every change in the tax system of the country where the firm is located. Therefore, in an international environment a general approach is needed, which can be altered for any given situation. At the same time personal taxes play an increasing role in the valuation of companies. Therefore, their consideration is integrated into the models derived. Finally, the resulting generalized versions of the Modigliani/Miller- and Miles–Ezzell-Formulas for adjusting the cost of capital to changes in leverage are applied to the situation of a corporation located in Germany after the Tax Reform Act of 2000.

CDS (credit default swap) contracts that were initiated some time ago frequently have spreads and/or maturities that are not available on the current market of CDSs, and are thus illiquid. This article introduces an incomplete-market approach to valuing illiquid CDSs that, in contrast to the risk-neutral approach of current market practice, allows a dealer who buys an illiquid CDS from an investor to determine ask and bid prices (which differ) in such a way as to guarantee a minimum positive expected rate of return on the deal. An alternative procedure, which replaces the expected rate of return by an analogue of the Sharpe ratio, is also discussed. The approach to pricing just described belongs to the good-deal category of approaches, since the dealer decides what it would take to make an appropriate expected rate of return, and sets the bid and ask prices accordingly. A number of different hedges are discussed and compared within the general framework developed in the article. The approach is implemented numerically, and example plots of important quantities are given. The paper also develops a useful result in linear programming theory in the case that the cost vector is random.

We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and essential risk aversion independence. We suggest to solve these by a re-interpretation of the framework. This leads to the notion of an implied drift. We also present a heuristic derivation of the marginal indifference price and the marginal optimal hedge that might be useful in numerical computations.

Traditionally derivatives have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently however, aspects of the valuation have been revised to incorporate certain elements of the balance sheet. Examples are the debt valuation adjustment which incorporates default risk of the bank holding the derivative, and the funding valuation adjustment that some authors have proposed to include the cost of funding into the valuation. This paper investigates the valuation of derivatives as part of a balance sheet. In particular, the paper considers funding costs, default risk and liquidity risk. A valuation framework is developed under the elastic funding assumption. This assumption states that funding costs reflect the quality of the assets, and any change in asset composition is immediately reflected in the funding costs. The result is that funding costs should not affect the value of derivatives. Furthermore, a new model for pricing liquidity risk is described. The paper highlights that the liquidity spread, used for discounting cashflows of illiquid assets, should be expressed in terms of the liquidation value (LV) of the asset, and the probability that the institution holding the asset needs to liquidate its assets.

In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the given information. A further problem is that asset prices are typically expressed in terms of a risk-neutral measure. This makes it difficult to transfer the fundamental results of financial mathematics to econometrics. I show that the aforementioned problems evaporate if the financial market is complete and sensitive. In this case, after an appropriate choice of the numéraire, the discounted price processes turn out to be uniformly integrable martingales under the real-world measure. This leads to a Law of One Price and a simple real-world valuation formula in a model-independent framework where the number of assets as well as the lifetime of the market can be finite or infinite.

Existing studies show that markets use comparable firm multiples to price IPOs. This study explores IPO valuations in an emerging market where reliable comparable price multiples may not be readily available, or cannot be reliably identified. In particular, we examine the value relevance of price-earnings multiples disclosed by managers in IPO prospectuses in China. Using a sample of IPOs from 1992 to 2002, we find that price-earnings multiples disclosed by IPO firms provide significant power in explaining price formation in this emerging market. We also find that price-earnings multiples disclosed by IPO firms after 1999, when the China Securities and Regulatory Commission relaxed its internal guideline for approving IPO applications, are more informative. The results are robust to a variety of empirical model specifications. This study contributes to the existing IPO literature by showing that the disclosure of price-earnings multiples provides a mechanism for IPO firms to convey information about IPO firm quality when reliable comparable firm multiples may not exist.

This study proposes a resources deployment portfolio (RDP) approach to decomposing return on equity (ROE) for business analysis. The five components are return on operating equity (RoOE), return on financial equity (RoFE), return on other equity (RoXE), return on influencing equity (RoIE), and R&D intensiveness (R&DI). Empirical results demonstrate that RDP decomposition offers substantial improvement over DuPont decomposition in explaining market valuation. Confirming the perceived sustainability, RoOE is the most consistently significant component for both long-term and short-term value creation. In line with prior research findings, R&DI is generally significant in contributing to long-term value creation but is not significant for short-term value creation.

For valuations on convex bodies in Euclidean spaces, there is by now a long series of characterization and classification theorems. The classical template is Hadwiger’s theorem, saying that every rigid motion invariant, continuous, real-valued valuation on convex bodies in ${ℝ}^n$ is a linear combination of the intrinsic volumes. For tensor-valued valuations, under the assumptions of isometry covariance and continuity, there is a similar classification theorem, due to Alesker. Also for the local extensions of the intrinsic volumes, the support, curvature and area measures, there are analogous characterization results, with continuity replaced by weak continuity, and involving an additional assumption of local determination. The present authors have recently obtained a corresponding characterization result for local tensor valuations, or tensor-valued support measures (generalized curvature measures), of convex bodies in ${ℝ}^n$. The covariance assumed there was with respect to the group $\mathrm{\text{O}}(n)$ of orthogonal transformations. This was suggested by Alesker’s observation, according to which in dimensions $n>2$, the weaker assumption of $\mathrm{\text{SO}}(n)$ covariance does not yield more tensor valuations. However, for tensor-valued support measures, the distinction between proper and improper rotations does make a difference. This paper considers, therefore, the local tensor valuations sharing the previously assumed properties, but with $\mathrm{\text{O}}(n)$ covariance replaced by $\mathrm{\text{SO}}(n)$ covariance, and provides a complete classification. New tensor-valued support measures appear only in dimensions 2 and 3.

Let Γ be a totally ordered abelian group of finite rational rank r. Consider s and n two non-negative integers with r+s≤n and denote by K a field. The main purpose of this paper is to construct a s-dimensional valuation v of the quotient field K((X₁,…,X_n)) of the corresponding power series ring K[[X₁,…,X_n]] such that v birrationally dominates K[[X₁,…,X_n]] and has Γ as group of values. This is possible except for the case in which Γ=ℤ is the group of the integers, s=0, n≥2 and K does not admit an infinite algebraic extension. In this last case, we show that there does not exist such a valuation.

In contrast to the situation in classical linear algebra, not every tropically non-singular matrix can be factored into a product of tropical elementary matrices. We do prove the factorizability of any tropically non-singular 2 × 2 matrix and, relating to the existing Bruhat decomposition, determine which 3 × 3 matrices are factorizable. Nevertheless, there is a closure operation, obtained by means of the tropical adjoint, which is always factorizable, generalizing the decomposition of the closure operation * of a matrix.

Let F be a Henselian field. For a finite extension K of F, the norm factor group is computed. As an application, structure of the tame Brauer group of a generalized local field is determined. In particular, we observe that every torsion divisible abelian group is realizable as the tame Brauer group of a generalized local field.

In this paper we argue that employee stock options should be expensed on the grant date and then marked to market on subsequent reporting dates. One of the advantages of our approach is that the cumulative amount expensed for a stock option over the whole of its life does not depend on the option pricing model used. The option pricing model influences only the way in which expenses are allocated to time periods. Our paper proposes an option pricing model appropriate for employee stock options. The model explicitly considers the vesting period, the possibility that employees will leave the company during the life of the option, the inability of employees to trade their options, and dilution issues.

Over the last decade the Danish corporate environment has experienced a significant increase in the use of option-based compensation (OBC). This and many other facts are documented in the present paper, which provides the first insights into the characteristics of the option and warrant contracts issued by the complete sample of Danish companies listed on the Copenhagen Stock Exchange.

A newly constructed database containing all publicly available information on details of Danish OBC contracts allows us to present, for example, results regarding contract values at an aggregated as well as at firm, personnel group, and individual levels. The paper also presents evidence on the incentive effects provided by the option-based compensation contracts adopted by Danish listed companies.

This paper examines how forfeiture, vesting, and early exercise affect the value of employee stock options. The forfeiture and exogenous exercise of the options are modeled as two Poisson processes with constant intensity. Rational exercise by the employee due to the option's American feature is modeled as endogenous exercise. The Crank–Nicholson numerical method is used to solve for the resulting value of employee stock options. Results are consistent with the findings that the employee stock options are worth substantially less than the Black–Scholes formula value. The model demonstrates that the option holder would rationally exercise the option early even when the underlying stock pays no dividend. The model also provides results on the expected time to exercise of employee stock options and the expected exercise price relative to strike price. The method used in this paper is proposed as an alternative to the Black–Scholes formula for measuring fair market value of employee stock options for accounting and regulation purposes.

Executive stock options are an important component of executive compensation and the topic is of interest to both practitioners and academics. The vigorous debate on whether these options should be treated as an expense is subsiding but discussion continues on how these instruments should be valued in order to expense them. In this paper, executive stock options are viewed as contingent claims on a firm's assets and we formalize this through the concept of an augmented balance sheet. This means that the total market value of the firm's assets is equal to the market value of its traded securities plus the market value of its stock options. This approach leads to two valuation formulae for these options: one in terms of the firm's stock price and the other in terms of firm value. We explore the connections between these two approaches and derive explicit valuation formulae under certain assumptions.