RISK ANALYSIS AND ASSET VALUTION - A MONTE-CARLO SIMULATION USING STOCHASTIC RENTS

Introduction of the Present Value Distribution Model (PVD) offers an a lternative method for the valuation of projects yielding intertemporal stochastic rents. A combination of concepts from many areas of the li terature yields the given model. The base procedure relies on Monte Ca rlo Simulation with the application of recently established theories o n stochastic rents, path dependent cash flow trajectories, and period dependent discount rates. Among the benefits of the (PVD) are exogenou s risk discounting and consistent distribution determination. Risk dis counting is applied to the resultant of the distribution model rather than within the model. Furthermore, the present value distributions ar e independent of analyst's perceptions yielding an objective single pe riod gamble.