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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- 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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- Tailan Chi & Donald J McGuire, 1996. "Collaborative Ventures and Value of Learning: Integrating the Transaction Cost and Strategic Option Perspectives on the Choice of Market Entry Modes," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 285-307, June.
- R. C. Merton, 1970.
"Optimum Consumption and Portfolio Rules in a Continuous-time Model,"
58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
- Robert H. Keeley & Sanjeev Punjabi & Lassaad Turki, 1996. "Valuation of Early-Stage Ventures: Option Valuation Models vs. Traditional Approaches," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 5(2), pages 115-38 , Summer.
- 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.
- Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
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