The following points highlight the three main types of fundamental valuation of securities in a company. The types are:- 1. Valuation of Convertible Bonds/Debentures 2. Valuation of 'Rights' 3. Valuation of Bonds. Type # 1. Valuation of Convertible Bonds/Debentures: Convertibles enjoy the benefits of both debt (initially) and equity (later). The terms of conversion will decide the pricing of these [...]
The CAPM was developed to explain how risky securities are priced in market and this was attributed to experts like Sharpe and Lintner. Markowitz Theory being more theoretical, CAPM aims at a more practical approach to stock valuation. It is no doubt based on the mean-variance approach to risk for assessment of investment as developed by Markowitz. It explains the [...]
In valuation of investments, one has to consider his assets in the portfolio as a part of his total investments. In considering the portfolio, not only returns are to be considered as in the case of single investments but their risks also. Two plus two will not make it four in the aggregation of risks, as shown by famous author [...]