Assumed Rates of Discount for Valuations of
- Topics:
- Stock Options
- Tags:
- Asset Management,
- Business Operations,
- Finance,
- Financial Services,
- Generation,
- Investment,
- Operational Planning,
- Pension Research Council,
- Valuation
- Source:
- Pension Research Council
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Overview: This paper uses arbitrage principles to show that the use of expected returns including equity premia is biased in favor of early generations at the expense of later generations, a wealth transfer disguised as risk diversification over time. It is shown that unbiased results can be developed, with no wealth transfers between generations, by assuming risk-free rates of return independently of the actual asset mix.
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Format: PDF | Size: 131KB | Date: Mar 2001 | Pages: 52
