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In valuing both options and debt securities, appraisers face the challenge of providing a valuation that will account for market changes. As with other valuation assignments, this requires the analyst to synthesize current and historical market data into a cogent argument about the future. And, as with other valuation assignments, a number of methods and tools are available for this purpose. Ensuring their proper application, however, along with a correct analysis of their implementation and output can mean the difference between a defensible valuation and certain disaster.
The Advanced Workshop on Determining Volatility and Market Yield will address these challenges and the best practices for their resolution in an intensive, four-hour interactive setting. Featuring experts David Dufendach, Oksana Westerbeke, and Jared Hannon, the workshop will examine what analysts can learn from the marketplace and how to put it to use for the valuation of both options debt securities. With guidance from best practices and professional standards, listeners will learn when and how to put these methods to use.
Developing the expected volatility assumption in the valuation of options and option-like securities:
Types of volatility measures:
Historical realized volatility
Exchange traded option implied volatility
General guidelines for developing estimates of volatility (ASC 718 and SAB 14)
How to estimate the historical realized volatility and option-implied volatility of a company
Methodology of developing a longer term volatility of newly public companies
AICPA recommendations for estimating the expected volatility for privately-held companies
Why size is important in estimating the volatility
How to adjust for the size differences between the subject company and the guideline companies
How to adjust for leverage differences between the subject company and the guideline companies
Developing the market yield assumption in the valuation of debt and debt-like securities:
Driving factors behind the debt's credit rating
Methodologies to develop a synthetic credit rating for the subject company
Pros and cons of synthetic credit rating methodologies
How to factor in debt's seniority and presence of collateral into the market yield or spread
How to develop the market yield for the debt
Application of the Yield Method in the valuation of debt
Q&A
Conclusion
Learning Objectives
Learn how to accurately and defensibly develop expected volatility assumptions and market yield assumptions
Learn what professional standards and guidelines say about volatility and market yield determination
Learn how current and historical market data can be used in the determination of debt and equity valuation inputs
Learn how target company information can be used in the determination of debt and equity valuation inputs
Learn how security-specific information can be used in the determination of debt and equity valuation inputs
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