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Strategic Asset Valuation: A Model Including Asymmetry and Kurtosis in Its Distribution in Continuous Time

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  • Gaston Milanesi
  • Gabriela Pesce
  • Emilio El Alabi

Abstract

The valuation of real assets is a complex problem which influences the strategic decision making in companies, such as decisions to differing or selling a project. Uncertainty takes over the manager when defining the attributes of the density function representing values that could assume the asset in the future. In this issue, we include not only its mean and variance, but also stochastic higher moments of this function (asymmetry and kurtosis). This paper proposes to valuate this type of entrepreneurships using real options theory making adjustments that allow us to abandon the assumption of normal returns in continuous time. This technique permits the expansion’s coefficient to depend also on the higher moments, either the original distribution or the approach one. Therefore, we obtained theoretical solutions to asset valuations that would have been impossible to solve.

Suggested Citation

  • Gaston Milanesi & Gabriela Pesce & Emilio El Alabi, 2015. "Strategic Asset Valuation: A Model Including Asymmetry and Kurtosis in Its Distribution in Continuous Time," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 1(1), pages 91-104, March.
    • Handle: RePEc:khe:scajes:v:1:y:2015:i:1:p:91-104
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asymmetry; Kurtosis; Edgeworth Expansion; Continuous Time; Real Option; Firm Valuation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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