Equity as a Call Option on Mean-Reverting Cash Flows

S.W. Chang

Working Papers from University of Southampton - Department of Accounting and Management Science

Abstract: The purpose of this paper is to present an application of a cach flow-based Contingent Claims Analysis (CCA) to equity valuation. The cach flow-based Contingent Claims Analysis is used to extend a traditional CCA toproblems with incomplete capital markets, overreacted markets of situations where value oa a firm can not be correctly by summing up all the firm's claims.

Keywords: FINANCIAL MARKET; ENTERPRISES; STOCHASTIC MODELS (search for similar items in EconPapers)
JEL-codes: D50 D52 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1998
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