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Valuation Under Uncertainty*

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  • Chen, Houng-Yhi

Abstract

Broadly speaking there are two models to the problem of asset valuation under uncertainty and aversion to risk. Under one, the certaintyequivalent method, each future return is converted to its certainty equivalent and discounted at the pure rate of interest. Under the other, the risk-adjusted discount rate method, each future return is discounted at an appropriate discount rate. The interrelation and validity of these models of asset valuation have come under discussion in two important works on stock valuation.

Suggested Citation

  • Chen, Houng-Yhi, 1967. "Valuation Under Uncertainty*," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(3), pages 313-325, September.
    • Handle: RePEc:cup:jfinqa:v:2:y:1967:i:03:p:313-325_01
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    Cited by:

    1. William L. Beedles, 1978. "On The Use Of Certainty Equivalent Factors As Risk Proxies," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 1(1), pages 15-21, December.
    2. Saksonova Svetlana & Savina Svetlana, 2016. "Financial Management as a Tool for Achieving Stable Firm Growth," Economics and Business, Sciendo, vol. 29(1), pages 49-55, August.
    3. Madan, Dilip B., 2014. "Modeling and monitoring risk acceptability in markets: The case of the credit default swap market," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 63-73.
    4. Juan Jose Cruces & Marcos Buscaglia & Joaquin Alonso, 2002. "The Term Structure of Country Risk and Valuation in Emerging Markets," Working Papers 46, Universidad de San Andres, Departamento de Economia, revised Apr 2002.
    5. Roland Pérez, 1971. "Décisions financières et valeur de l'entreprise. Deux approches néo-classiques alternatives," Revue Économique, Programme National Persée, vol. 22(5), pages 792-811.
    6. James W. Kolari, 1987. "An Analytical Model Of Risky Yield Curves," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 10(4), pages 295-303, December.
    7. Francesca Beccacece & Roberto Tasca & Luisa Tibiletti, 2021. "The Macaulay Duration: A Key Indicator for the Risk-Adjustment in Fair Value," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 251-251, July.

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