Hostname: page-component-cb9f654ff-k7rjm Total loading time: 0 Render date: 2025-08-24T08:48:45.370Z Has data issue: false hasContentIssue false
  • English
  • Français

Term-Risk Structures and the Valuation of Projects

Published online by Cambridge University Press:  06 April 2009

Uri Dothan  and
Joseph Williams
Get access Rights & Permissions [Opens in a new window]

Extract

Among the many financial problems facing managers of firms, capital budgeting problems are often the most important. Over the years these problems have received considerable attention from financial economists with more recent work emphasizing two separate approaches. One currently popular approach to capital budgeting is based on the simple linear relationship between risk and return from the intertemporal capital asset pricing model (CAPM) of Merton [20]. Papers in this category include Brennan [7], Bogue and Roll [4], Treynor and Black [26], Myers and Turnbull [21], Fama [15], Bhattacharya [2], and Constantinides [9].

Information

Type
The Term Structure of Interest Rates and the Pricing of Fixed Rate Securities
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 4 , November 1980 , pp. 875 - 905
Copyright
Copyright © School of Business Administration, University of Washington 1980

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

[1]Banz, R. W., and Miller, M. H.. “Prices of State-Contingent Claims: Some Estimates and Applications.” Journal of Business, Vo. 51 (1978), pp. 653–672.Google Scholar
[2]Bhattacharya, S. “Project Valuation with Mean-Reverting Cash Flow Streams.” Journal of Finance, Vol. 33 (1978), pp. 1317–1332.Google Scholar
[3]Bhattacharya, S “A Fairly General Asset Pricing Model and Some Remarks on Multiperiod Valuation.” Graduate School of Business, University of Chicago (08 1978).Google Scholar
[4]Bogue, M. C, and Roll, R.. “Capital Budgeting of Risky Projects with Imperfect Markets for Physical Capital.” Journal of Finance, Vol. 29 (1974), pp. 601–613.Google Scholar
[5]Breeden, D. T. “An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities.” Journalof Financial Economics, Vol. 7 (1979), pp. 265–296.Google Scholar
[6]Breeden, D. T., and Litzenberger, R. H.. “Prices of State-Contingent Claims Implicit in Option Prices.” Journal of Business, Vol. 51 (1978), pp. 621–652.Google Scholar
[7]Brennan, M. J. “An Approach to the Valuation of Uncertain Income Streams.” Journal of Finance, Vol. 28 (1973), pp. 661–674.Google Scholar
[8]Clark, J. M. C. “The Representation of Functionals of Brownian Motion by Stochastic Integrals.” Annals of Mathematical Statistics, Vol. 41 (1970), pp. 1282–1295.CrossRefGoogle Scholar
[9]Constantinides, G. M. “Market Risk Adjustment in Project Valuation.” Journal of Finance, Vol. 33 (1978), pp. 603–616.Google Scholar
[10]Constantinides, G. M. “Admissible Uncertainty in the Intertemporal Asset Pricing Model.” Journal of Financial Economics, Vol. 8 (1980), pp. 71–86.Google Scholar
[11]Courrege, P. “Integrales Stochastiques et Martingales de Carre Integrable.” In Seminaire de Theorie du Potentiel,Brelot, M., Choquet, G., and Deny, J., (eds.) Paris: Faculte des Sciences (1964), pp. 701–720.Google Scholar
[12]Cox, J. C.; Ingersoll, J. E.; and Ross, S. A.. “A Theory of the Term Structure of Interest Rates.” Research Paper 468, Graduate School of Business, Stanford University (08 1978).Google Scholar
[13]Dothan, U. “On the Term Structure of Interest Rates.” Journal of Financial Economics, Vol. 6 (1978), pp. 59–70.Google Scholar
[14]Dothan, U., and Williams, J. T.. “Valuation of Assets on a Markov State Space.” Economics Letters, Vol. 1 (1978), pp. 163–166.CrossRefGoogle Scholar
[15]Fama, E. F. “Risk-Adjusted Discount Rates and Capital Budgeting under Uncertainty.” Journal of Financial Economics, Vol. 5 (1977), pp. 3–24.Google Scholar
[16]Friedman, A. “Stochastic Differential Equations and Applications,” Vol. 1. (1975) New York: Academic Press.Google Scholar
[17]Garman, M. B. “A General Theory of Asset Valuation under Diffusion State Processes.” Working Paper 50, Graduate School of Business, University of California, Berkeley (1976).Google Scholar
[18]Harrison, J. M., and Kreps, D. M.. “Martingales and Arbitrage in Multiperiod Securities Markets.” Journal of Economic Theory, Vol. 20 (1979), pp. 381–408.Google Scholar
[19]Merton, R. C. “Optimum Consumption and Portfolio Rules in a Continuous Time Model.” Journal of Economic Theory, Vol. 3 (1971), pp. 373–413.Google Scholar
[20]Merton, R. C “An Intertemporal Capital Asset Pricing Model.” Econometrica, Vol. 41 (1973), pp. 867–887.CrossRefGoogle Scholar
[21]Myers, S. C, and Turnbull, S. M.. “Capital Budgeting and the Capital Asset Pricing Model: Good News and Bad News.” Journal of Finance, Vol. 32 (1977), pp. 321–332.Google Scholar
[22]Richard, S. F. “An Arbitrage Model of the Term Structure of Interest Rates.” Journal of Financial Economics, Vol. 6 (1978), pp. 33–57.CrossRefGoogle Scholar
[23]Ross, S. A. “A Simple Approach to the Valuation of Risky Streams.” Journal of Business, Vol. 51 (1978), pp. 453–476.CrossRefGoogle Scholar
[24]Rubinstein, M. “The Strong Case for the Generalized Logarithmic Utility Model as the Premier Model of Financial Markets.” Journal of Finance, Vol. 31 (1976), pp. 551–572.Google Scholar
[25]Smith, C. W. “Option Pricing: A Review.” Journal of Financial Economics, Vol. 3 (1976), pp. 3–52.Google Scholar
[26]Treynor, J. L., and Black, F.. “Corporate Investment Decisions.” In Modern Developments in Financial Management, Myers, S. C. (ed.). New York: Praeger Publishers (1976), pp. 310–327.Google Scholar