Abstract

References (26)

Beta

One-Click Download | Share | Email | Add to Briefcase

Arbitrage-Free Valuation of Investment Projects using Risk-Adjusted Discount Rates

Marc Steffen Rapp
Technische Universität München - Center for Entrepreneurial and Financial Studies

July 29, 2004

Abstract:
This short note discusses the link between the certainty equivalent approach of modern asset pricing theory and the cost of capital approach in DCF-models in a capital market model. Therefore we distinguish two notions of cost of capital: (a) risk-adjusted discount rates for a particular cash flow and (b) risk-adjusted returns of the project. In order to account for the flow of information both types are defined with respect to the valuation date.

Note: Downloadable document is in German.

Keywords: Risk neutral valuation, capital budgeting

JEL Classifications: D81, G12, G31

Working Paper Series

Date posted: June 15, 2004 ; Last revised: July 29, 2004

Suggested Citation

Rapp, Marc Steffen, Arbitrage-Free Valuation of Investment Projects using Risk-Adjusted Discount Rates (July 29, 2004). Available at SSRN: http://ssrn.com/abstract=520962

Export to: Export Citation What's this?

Contact Information

Marc Steffen Rapp (Contact Author)

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstraße 21
80333 Munich Germany
++49/89/289-25486 (Phone)
++49/89/289-25488 (Fax)

HOME PAGE: http://www.ifm.wi.tum.de