Modern Valuation Tecniques - download pdf or read online

By Stuart Jarvis, Frances Southall and Elliot Varnell

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The investment strategy does change the split between the stakeholders, and in particular the net surplus attributable to the shareholders, which will affect the profitability and consequently the market value of the firm. These are the second order effects discussed earlier in the paper. 31 Modern Valuation Techniques General insurance example If we zoom in on the net surplus figures, we can see the effect of the investment strategy on the present value of the surplus attributable to the shareholders.

This demonstrates clearly the result of Modigliani & Miller. The present value of the gross surplus is unaffected by the investment strategy. The stakeholders are the tax authority, the shareholders and a third group who benefit from frictional costs. The third group would consist of employees, recruitment agencies, suppliers etc. The investment strategy does change the split between the stakeholders, and in particular the net surplus attributable to the shareholders, which will affect the profitability and consequently the market value of the firm.

C. (1997). J. , (2001). "Pensions, funding & risk", in preparation. , (1998). , INGERSOLL, J. , (1985). "A theory of the term structure of interest rates", Econometrica 53: 385-408 DUFFIE, D. (1996). , TEEGER, M. , (1999). "A Stochastic Investment Model for Asset & Liability Management" SIAS Paper FLESAKER, B. , (1995). "Positive interest", Risk, 9: 46-49 FLESAKER, B. , (1997). P. , (2001). "A market-based approach to pricing with-profits guarantees", British Actuarial Journal 6: 143-196. , (1981).

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Modern Valuation Tecniques by Stuart Jarvis, Frances Southall and Elliot Varnell


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