Estimating unobservable valuation parameters for illiquid assets

Glenn Boyle, Graeme Guthrie () and Neil Quigley

Accounting and Finance, 2009, vol. 49, issue 3, pages 465-479

Abstract: A problem that often arises in applied finance is one where decision-makers need to choose a value for some parameter that will affect the cash flows between two parties involved in the operation of an illiquid asset. Because the values of the cash flows also depend on various unobservable parameters, identifying the value of the policy parameter that achieves the desired allocation between the parties is no simple task, often resulting in disputes and the invocation of ad hoc approaches. We show how this problem can be solved using an extension of the well-known 'implied volatility' technique from option pricing, and apply it to the determination of equilibrium rental rates on ground leases of commercial land. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

Date: 2009

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-629X.2008.00293.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:acctfi:v:49:y:2009:i:3:p:465-479

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand
Series data maintained by Christopher F. Baum ().