VALUE‐AT‐RISK AND CORPORATE VALUATION

Stephen Godfrey and Ramon Espinosa

Journal of Applied Corporate Finance, 1998, vol. 10, issue 4, 108-115

Abstract: Although first used mainly by financial institutions to evaluate their trading risks, Value‐at‐Risk (VAR) can also be used to enhance an industrial corporation's understanding and management of its market risks. To illustrate this broader application of VAR analysis, the authors present a simple example focusing on the valuation of a closely held company. In this case, VAR is used to analyze the sensitivity of the firm's value to movements in uncertain exchange rates, commodity prices, and interest rates.

Date: 1998
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