Discount for Lack of Marketability for any Restriction Period: Mastering the Average-Strike Put Option Model
Part 4 of BVR's Special Series on Discounts for Lack of Marketability
Tuesday, February 16, 2016
10:00am-11:40am PT • 1:00pm-2:40pm ET
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Everyone knows that stock transfer restrictions limit a share’s marketability and reduce its value, but did you know the accuracy of value of an average-strike put option DLOM model worsens as the restriction period lengthens? Join John Finnerty for this master level session on determining an accurate average-strike put option DLOM for whatever restriction period the engagement calls for. Be confident when others see complexity, and fortify your DLOM knowledge with step-by-step instructions in advanced scenarios.
- What the DLOM is intended to measure
- Overview of option-based DLOM models
- Description of the average-strike put option DLOM model
- Simplifying the average-strike put option DLOM model for a 1-year restriction period
- Generalization of the 1-year average-strike put option DLOM model to longer restriction periods of fixed length
- DLOM term premium or discount
- Baseline parameter values
- Term-premium-adjusted average-strike put option DLOM model
- Generalization of the average-strike put option DLOM model to a restriction period of uncertain length
- General formula for the average-strike put option DLOM
- Understand the fundamental features of the various option-based DLOM models
- Learn how to simplify the average-strike put option DLOM model when the length of the restriction period is 1 year and how the 1-year average-strike put option DLOM model can be generalized to longer restriction periods of fixed duration
- Learn general formula for the average-strike put option DLOM
- Understand how to apply the general formula for the average-strike put option DLOM to calculate DLOMs in a variety of practical situations
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