On the use of the terminal-value approach in risk-value models

Gregor Dorfleitner ()
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Gregor Dorfleitner: University of Regensburg

Annals of Operations Research, 2022, vol. 313, issue 2, No 13, 877-897

Abstract: Abstract We extend risk-value models for valuing streams of risky cash flows by establishing the well-known concept of terminal value in this context. For a constant growth assumption we are able to derive upper and lower bounds for the terminal value in the case of a translation-invariant and in the case of a position-invariant risk measure. For both cases we also obtain an exact formula under a special growth assumption for the future cash flows. Furthermore, we provide results on the applicability of the general findings for the case that the log-return of the risky investment follows a Brownian motion.

Keywords: New approach; Business valuation; Project valuation; Terminal value; Risk measure (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10479-020-03644-2

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