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The Log Private Company Valuation Model

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  • Battulga Gankhuu

Abstract

For a public company, the option pricing models, hedging models, and pricing and hedging models of equity-linked life insurance products have been developed. However, for a private company, because of unobserved prices, the option and the life insurance pricing, and the hedging are challenging tasks. For this reason, this paper introduces a log private company valuation model, which is based on the dynamic Gordon growth model. In this paper, we obtain closed-form option pricing formulas, hedging formulas, and net premium formulas of equity--linked life insurance products for a private company. Also, the paper provides ML estimators of our model, EM algorithm, and valuation formula for the private company.

Suggested Citation

  • Battulga Gankhuu, 2022. "The Log Private Company Valuation Model," Papers 2206.09666, arXiv.org, revised Aug 2023.
    • Handle: RePEc:arx:papers:2206.09666
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    References listed on IDEAS

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