Abstract:
This article presents a new methodological approach to value private equity investments based on simulation. The valuation relies on 'imperfect replication'. This method does not presuppose the perfection of the capital market and is essentially built on measuring the risk. The approach turns out to be easy to implement. Firm specific characteristics as well as and existing special rights can be depicted and modelled. The proposed methodology is of immediate practical usefulness as it can help to find decision support for concrete investment situations. Also, during the investment period it can be used for monitoring. The originality of the research lies in the combination of Monte Carlo simulation, multiple methods, relevant risk measures and risk-value models.