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Value‐At‐Risk And Corporate Valuation

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  • Stephen Godfrey
  • Ramon Espinosa

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.

Suggested Citation

  • Stephen Godfrey & Ramon Espinosa, 1998. "Value‐At‐Risk And Corporate Valuation," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(4), pages 108-115, January.
    • Handle: RePEc:bla:jacrfn:v:10:y:1998:i:4:p:108-115
    DOI: 10.1111/j.1745-6622.1998.tb00314.x
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    Cited by:

    1. Alesii, Giuseppe, 2005. "VaR in real options analysis," Review of Financial Economics, Elsevier, vol. 14(3-4), pages 189-208.
    2. Giuseppe Alesii, 2005. "VaR in real options analysis," Review of Financial Economics, John Wiley & Sons, vol. 14(3-4), pages 189-208.

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