Some Potential Means for Venture Valuation
In some modern venture valuation approaches, option pricing theory plays an important role. The aim of this paper is to present some tools and viewpoints which might be helpful for future investigations along this line. We model the value-dynamics Xt of an imbedded underlying X as a non-lognormally-distributed generalization of the geometric Brownian motion. In detail, Xt is supposed to be a solution of a stochastic differential equation of the form with non-constant volatility function ? (t) and Brownian motion Wt . For this, we discuss a certain decision problem concerning the size of the trend function b . Under some handy-toverify but far-reaching assumptions, we investigate the (average) reduction of decision risk that can be obtained by observing the sample path of X . Furthermore, we also show some connections with the valuation of call options on X .
Volume (Year): 7 (2002)
Issue (Month): 3 (Fall)
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- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
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- Mark Rubinstein, 1976. "The Valuation of Uncertain Income Streams and the Pricing of Options," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 407-425, Autumn.
- Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
- Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
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