The recent crisis in financial markets has seen a gradual erosion of risk-free asset classes. In equity markets the credit risk has reached a critical level in valuation. Here a new cost of equity method for private companies is presented based on the pricing of junior subordinated notes. Global...

Real option theory allows using financial option models to value investments and firms. Traditional models present a substantial problem to positively correlate underlying asset volatility with firm value. Therefore, an alternative approach is used based on a particular type of exotic option,...

In this paper, we use financial valuation techniques to measure the unfunded liabilities associated with the PBGC single‐employer pension insurance program. This is an alternative approach to the calculations of expected future PBGC payouts in the PBGC Exposure Reports. The PBGC insurance is...