Valuation of Deferred Tax Assets Using a Closed Form Solution

Deferred tax asset (DTA) is a tax/accounting concept that refers to an asset that may be used to reduce future tax liabilities of the holder. It usually refers to situations where a company has either overpaid taxes, paid taxes in advance, or has carry-over of losses (the latter being the most common situation). DTAs are thus contingent claims, whose underlying assets are the company's future profits. Consequently, the correct approach to value such rights implies the use of a contingent claim valuation framework. The purpose of this chapter is to propose a precise and conceptually sound mathematical approach to value DTAs, considering future projections of earnings and rates, alongside the DTA's legal time limit. The authors show that with the proposed evaluation techniques, the DTA's expected value will be much lower than the values normally used in today's practice, and the company's financial analysis will lead to much more sound and realistic results.

Contingent-claim Valuation of a Closed-end Fund: Models and Implications

In this paper, we develop various valuation models for closed-end mutual funds under different sets of stochastic processes for the underlying assets. Since we used different stochastic processes from previous literature, it was possible to derive more interesting implications regarding investment strategies, discount puzzles of the funds, and valuation models. In particular, by utilizing Brownian motions and optimal stopping time framework, we succeeded in developing more realistic valuation model, which indicates that we can understand more easily about decision makings regarding optimal timing of reorganization from the closed-end funds to open-ended funds, optimal timing of trading of closed-end funds to realize maximum profits, and optimal design of closed-end fund structure.

Continuous-time methods in the study of discretely sampled functionals of Lévy processes. I. The positive process case

In this paper we develop a constructive approach to studying continuously and discretely sampled functionals of Lévy processes. Estimates for the rate of convergence of the discretely sampled functionals to the continuously sampled functionals are derived, reducing the study of the latter to that of the former. Laguerre reduction series for the discretely sampled functionals are developed, reducing their study to that of the moment generating function of the pertinent Lévy processes and to that of the moments of these processes in particular. The results are applied to questions of contingent claim valuation, such as the explicit valuation of Asian options, and illustrated in the case of generalized inverse Gaussian Lévy processes.

Continuous-time methods in the study of discretely sampled functionals of Lévy processes. I. The positive process case

In this paper we develop a constructive approach to studying continuously and discretely sampled functionals of Lévy processes. Estimates for the rate of convergence of the discretely sampled functionals to the continuously sampled functionals are derived, reducing the study of the latter to that of the former. Laguerre reduction series for the discretely sampled functionals are developed, reducing their study to that of the moment generating function of the pertinent Lévy processes and to that of the moments of these processes in particular. The results are applied to questions of contingent claim valuation, such as the explicit valuation of Asian options, and illustrated in the case of generalized inverse Gaussian Lévy processes.