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The Log Private Company Valuation Model

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  • Battulga Gankhuu

Abstract

For a public company, pricing and hedging models of options and equity--linked life insurance products have been sufficiently developed. However, for a private company, because of unobserved prices, pricing and hedging models of the European options and life insurance products are in their early stages of development. For this reason, this paper introduces a log private company valuation model, which is based on the dynamic Gordon growth model. In this paper, we obtain closed--form pricing and hedging formulas of the European options and equity--linked life insurance products for private companies. Also, the paper provides Maximum Likelihood (ML) estimators of our model, Expectation Maximization (EM) algorithm, and valuation formula for private companies.

Suggested Citation

  • Battulga Gankhuu, 2022. "The Log Private Company Valuation Model," Papers 2206.09666, arXiv.org, revised Sep 2024.
    • Handle: RePEc:arx:papers:2206.09666
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