Archive for February, 2008
Risk and Monte Carlo simulation
Risk, when does it occurs? Whenever the outcome of a situation is not 0 or 1 you have uncertainty or risk.
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Risk, price and value
Having arrived at the probability distribution for the value of equity (see full story) we are able to calculate expected gain, loss and their probability when investing in a company where the capitalized value (price) is known.
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Real options
In real life both for investment decisions and in valuation of companies there are managerial flexibility in the sense that at future points of time there is flexibility in choosing among alternatives.
