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From point through density valuation to individual risk assessment in the discounted cash flows method

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  • Marcin Dec

    (Group for Research in Applied Economics (GRAPE))

Abstract

We review the developments and practice of the discounted cash-flow method in finance with an intermediate goal of presenting parsimonious methods of generating density valuation rather than point forecasts. Our ultimate aim is to select, propose and discuss some density-based risk measures that may be used by appraisers and investment analysts when conducting DCF valuation for broad group of heterogeneous (by risk appetite) final users or investors. Such a toolbox may be applied directly by the latter group without necessity to rely on aggregated point valuations and recommendations.

Suggested Citation

  • Marcin Dec, 2019. "From point through density valuation to individual risk assessment in the discounted cash flows method," GRAPE Working Papers 35, GRAPE Group for Research in Applied Economics.
    • Handle: RePEc:fme:wpaper:35
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    File URL: http://grape.org.pl/WP/35_Dec_website.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    discounted cash-flows; density forecasts; downside risk measures; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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