Toll 00
Toll 00
Toll 00
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '
-DDNNR2OOLOD
+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
(;(&87,9(6800$5<
7KH WUDGLWLRQDOPHDQVIRUDILQDQFLDOHYDOXDWLRQRI D UHVHDUFK DQG GHYHORSPHQW 5 '
SURMHFW VXFK DV QHW SUHVHQW YDOXHV DQG SUREDELOLW\ZHLJKWHG GHFLVLRQ WUHHV DVVXPH D
VWDWLFLQYHVWPHQWHQYLURQPHQWDQGDNQRZQUDQJHRISRVVLEOHRXWFRPHVIRUWKHGLIIHUHQW
VRXUFHV RI XQFHUWDLQW\ LQ WKH SURMHFW ,Q VRPH FDVHV WKLV OHDGV WR PLVVLQJ SURILWDEOH
RSSRUWXQLWLHVVLQFHWKHYDOXHRIPDQDJHULDOIOH[LELOLW\WR DGMXVW GHFLVLRQPDNLQJ WR VXLW
XQH[SHFWHGIXWXUHHYHQWVLVRPLWWHG7KLVORVWYDOXHEHFRPHVODUJHULQHQYLURQPHQWVZLWK
KLJKFXPXODWLYHLQYHVWPHQWFRVWVDORQJLQYHVWPHQWKRUL]RQDQGDFRPSOH[VWUXFWXUHRI
WRWDOXQFHUWDLQW\DIIHFWLQJSURMHFWHYDOXDWLRQ,QYHVWPHQWVLQSKDUPDFHXWLFDO5 'KDYH
WKHVHFKDUDFWHULVWLFV
2QHUHPHG\SURSRVHGLVWKHUHDORSWLRQVDSSURDFKWRSURMHFWHYDOXDWLRQ(VVHQWLDOO\WKH
GLIIHUHQWVWDJHVRIDQ5 'SURMHFWDUHFRQVLGHUHGWRLQFOXGHUHDORSWLRQVWKDWPXVWEH
YDOXHG DFFRUGLQJO\ 7KH REMHFWLYH RI WKH WKHVLV LV WR FODULI\ WKH FRQFHSW DQG WKH
DSSOLFDELOLW\ RI WKH UHDO RSWLRQV PHWKRGRORJ\ LQ PDQDJLQJ SKDUPDFHXWLFDO 5 '
LQYHVWPHQWV DQG WR FRPSDUH WKH PHWKRGRORJ\ ZLWK WKH WUDGLWLRQDO 5 ' YDOXDWLRQ
PHWKRGV )XUWKHUPRUH WKH GHYHORSHG WKHRUHWLFDO FRQVWUXFW LV DSSOLHG LQ D FDVH 5 '
SURMHFWRIWKHFDVHFRPSDQ\2ULRQ3KDUPDLQRUGHUWRGHPRQVWUDWHWKHDSSOLFDELOLW\RI
WKHWKHRU\
%DVHGRQDOLWHUDWXUHVXUYH\DQGH[SHUWLQWHUYLHZVWKHRSWLRQWRDEDQGRQDQGWKHJURZWK
RSWLRQV HPEHGGHG LQ DQ 5 ' SURMHFW ZHUH LGHQWLILHG WR EH WKH PRVW VLJQLILFDQW UHDO
RSWLRQV LQ SKDUPDFHXWLFDO 5 ' 7ZR RSWLRQWKHRUHWLF YDOXDWLRQ PHWKRGV LH WKH
FRQWLQJHQW FODLPV DSSURDFK DQG VWRFKDVWLF G\QDPLF SURJUDPPLQJ ZHUH SUHVHQWHG DQG
FRQWUDVWHG ZLWK WKH WUDGLWLRQDO PHWKRGV 7KH FKRLFH RI WKH PRVW VXLWDEOH YDOXDWLRQ
PHWKRGIRUDVLQJOHUHDORSWLRQRUIRUWKHYDOXHRIDQHQWLUH5 'SURMHFWZDVIRXQGWR
GHSHQGRQIDFWRUVHQGRJHQRXVWRWKHRSWLRQRUSURMHFWXQGHUVWXG\7KHVHLQFOXGHWKH
VL]H RI HVWLPDWHG VDOHV WKH VWUXFWXUH RI WRWDO XQFHUWDLQW\ DQG WKH UHTXLUHG DFFXUDF\
EDODQFHGZLWKWKHDPRXQWRIWLPHDQGUHVRXUFHVDYDLODEOHIRUWKHSURMHFWYDOXDWLRQ
,QWKHFDVHVWXG\WKHRSWLRQWRDEDQGRQZDVYDOXHGXVLQJDGLVFUHWHWLPHELQRPLDOODWWLFH
DQGWKHJURZWKRSWLRQZDVYDOXHGXVLQJDNQRZQVROXWLRQIRUPXODIRUDFRQWLQXRXVWLPH
SDUWLDO GLIIHUHQWLDO HTXDWLRQ 7KH SURMHFW ZDV IRXQG WR EH SURILWDEOH E\ ERWK WKH
WUDGLWLRQDO DV ZHOO DV WKH RSWLRQWKHRUHWLF YDOXDWLRQ PHWKRGV 7KH JURZWK RSWLRQ ZDV
VKRZQ WRLQFUHDVHWKHWRWDOYDOXHRIWKHSURMHFWFOHDUO\7KHUHDORSWLRQVDSSURDFKZDV
IRXQGWREHPRVWYDOXDEOHZKHQWKHWRWDOXQFHUWDLQW\LQSURMHFWYDOXHZDVKLJKHVW
7KHPRVWLPSRUWDQWUHVXOWVRIWKHWKHVLVDUHWKDWUHDORSWLRQVH[LVWDQGWKDWWKHLUYDOXH
FDQ DIIHFW WKH LQYHVWPHQW GHFLVLRQV LQ DQ 5 ' SURMHFW ,QFOXGLQJ WKH YDOXH RI UHDO
RSWLRQVLQSURMHFWHYDOXDWLRQXQDPELJXRXVO\LQFUHDVHVWKHWRWDOYDOXHRIDQ5 'SURMHFW
,QSKDUPDFHXWLFDO5 'WKLVPHDQVWKDWWKHGHYHORSPHQWLVVWDUWHGZLWKPRUHFDQGLGDWH
PROHFXOHVVLQFHUHDORSWLRQYDOXDWLRQVHHVDGGLWLRQDOYDOXHLQ WKHP +RZHYHU WKH WRWDO
QXPEHURIPROHFXOHVLQWKHSLSHOLQHVWD\VWKHVDPHRQDYHUDJHDVPRUHSURMHFWVZLOOEH
DEDQGRQHG ODWHU RQ DV D UHVXOW RI QRW H[HUFLVLQJ WKH RSWLRQ WR SURFHHG +RZHYHU
DSSO\LQJ UHDO RSWLRQVDSSURDFK LQ SUDFWLFH UHTXLUHV RUJDQLVDWRULDO GLVFLSOLQH HIILFLHQF\
DQG XQGHUVWDQGLQJ RI WKH YDOXDWLRQ PHWKRGV $OVR FRPSDQ\ VL]H DQG PDQDJHULDO
LQFHQWLYHVRIWKHRUJDQLVDWLRQDIIHFWWKHVXLWDELOLW\RIWKHDSSURDFK
LL
,1752'8&7,21
%$&.*5281'2)7+(7+(6,6
027,9$7,21)257+(7+(6,6
5(6($5&+352%/(06
6&23(2)7+(7+(6,6
0(7+2'2/2*<
678'<$3352$&+
6758&785(2)7+(7+(6,6
LLL
,'(17,),&$7,212)5($/237,216,13+$50$&(87,&$/5 '
0$33,1*5(/(9$17237,216:,7+9$/8$7,210(7+2'2/2*<
7KH2SWLRQWR$EDQGRQ
7KH*URZWK2SWLRQ
$02'(/215($/237,216,13+$50$&(87,&$/5 '
,PSOLFDWLRQVRI2SWLRQ([HUFLVH
,PSDFWRQ'HFLVLRQ0DNLQJ
,PSDFWRQ3URMHFW3RUWIROLR6HOHFWLRQ
$33/,&$7,2172$&$6(678'<
&$6(&203$1<'(6&5,37,21
352-(&7'(6&5,37,21
5($/237,215(&2*1,7,21$1'9$/,'$7,21
6(/(&7,21$1''(6&5,37,212)9$/8$7,210(7+2'2/2*<
7KH2SWLRQWR$EDQGRQ
7KH*URZWK2SWLRQ
3$5$0(7(5(67,0$7,21
7KH2SWLRQWR$EDQGRQ
7KH*URZWK2SWLRQ
5(68/76
7KH2SWLRQWR$EDQGRQ
7KH*URZWK2SWLRQ
7KH2SWLRQWR6HOOWKH3URMHFWWRD6HFRQG3DUW\
6(16,7,9,7<$1$/<6,6
7KH2SWLRQWR$EDQGRQ
7KH*URZWK2SWLRQ
&KDQJHVLQ2WKHU3DUDPHWHU9DOXHV
35$&7,&$/,03/,&$7,216
6XJJHVWLRQV
7KH2SWLRQWR6HOO3URMHFWWR6HFRQG3DUW\
',6&866,2121&$6(678'<
*(1(5$/',6&866,21
&21&/86,216
5(/,$%,/,7<$1'9$/,',7<
5,6.$1$/<6,6
/,0,7$7,2162)7+(5($/237,2160(7+2'2/2*<
(IIHFWRI&RPSDQ\6L]HRQ,QYHVWPHQW3ROLF\
0DQDJHULDO,QFHQWLYHV
3266,%/($33/,&$7,216,17+(25*$1,6$7,21
5HTXLUHG5HVRXUFHV
723,&6)25)857+(5678'<
$33(1',&(6
5()(5(1&(6
LY
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 ',QWURGXFWLRQ
,1752'8&7,21
%DFNJURXQGRIWKH7KHVLV
)OH[LELOLW\KDVYDOXH 7KLVLVFRQFHSWXDOO\H[HPSOLILHGE\FRUSRUDWHGHFLVLRQPDNHUVZKR
UHVSRQG WR WKH XQIROGLQJ RI IXWXUH HYHQWV E\ FRQWLQXRXVO\ UHH[DPLQLQJ WKH FRPSDQ\
VWUDWHJ\ DQG LWV LQYHVWPHQW GHFLVLRQV <HW WKH DQDO\WLFDO WRROV WR VXSSRUW PDQDJHULDO
MXGJHPHQW RIWHQ IDOO VKRUW RI FDSWXULQJ WKH IXOO YDOXH RI WKH DELOLW\ WR DGMXVW WR D
FRPSHWLWLYHHQYLURQPHQW:KHQVWDWLFPHWULFVDUHXVHGFRQILGHQFHLQREMHFWLYHDQDO\VHV
LV ORVW DQG GHFLVLRQV PD\ XOWLPDWHO\ EH EDVHG RQ JXWIHHOLQJ ,Q WKH ZRUVW FDVH WKLV
GLYHUJHQFH IURP DQDO\WLFDO DUJXPHQWDWLRQ FDQ OHDG WR D JDS EHWZHHQ VWUDWHJLF SODQQLQJ
DQGILQDQFLDOWKHRU\
)OH[LELOLW\LQGHFLVLRQPDNLQJLVDSURGXFWRIWKUHHIDFWRUVXQFHUWDLQW\LUUHYHUVLELOLW\DQG
WKHWLPLQJRIWKHLQYHVWPHQWV7RJHWKHUWKHLUFRPELQHGLPSDFWJURZVZLWKWKHOHQJWKRI
WKH LQYHVWPHQW KRUL]RQ 8QFHUWDLQW\ DGGV DGGLWLRQDO GLPHQVLRQV VXQN FRVWV EHFRPH
ODUJHU DQG WKH RSWLRQV LQ WKH WLPLQJ RI WKH LQYHVWPHQWV LQFUHDVH %HDULQJ WKLV LQ PLQG
SKDUPDFHXWLFDOUHVHDUFKDQGSURGXFWGHYHORSPHQW5 'ZLWKLWVDYHUDJHF\FOHRIRYHU
WHQ\HDUVUHTXLUHVFRQVLGHUDEOHPDQDJHULDOIOH[LELOLW\7KHGLIIHUHQWSKDVHVLQWKHSURFHVV
RFFXU LQ FRQFHFXWLYH VWDJHV ZKHUHE\ WKH LQYHVWPHQW OD\RXWV LQFUHDVH ZLWK HDFK SKDVH
7KLV PHDQV WKDW WKHUH DUH FOHDUO\ GHILQHG GHFLVLRQ SRLQWV LQ ZKLFK WKH GLUHFWLRQ RI WKH
SURFHVVFDQEHDOWHUHGUHYHUVHGRUKDOWHG,QRWKHUZRUGVIOH[LELOLW\LQGHFLVLRQPDNLQJ
LVFHQWUDOLQSKDUPDFHXWLFDO5 '
,QWKLVVHWWLQJWKHPHWKRGRORJ\WRYDOLGDWHWKHUHVRXUFHDOORFDWLRQGHFLVLRQVQHHGVWREH
DSSURSULDWHDVZHOODVWUDQVSDUHQW<HWWUDGLWLRQDOFDSLWDOEXGJHWLQJPHWKRGVZKLFKDUH
XVXDOO\EDVHGRQGLVFRXQWHGFDVKIORZ'&)DQDO\VLVDUHZLGHO\DSSOLHGLUUHVSHFWLYHRI
WKH LQYHVWPHQW GHFLVLRQ DW KDQG 7KH GHILFLHQFLHV UHJDUGLQJ WKH VWDWLF QDWXUH RI WKRVH
PHWKRGV KDYH EHHQ DFNQRZOHGJHG EXW WKHLU VLPSOLFLW\ KDV RYHUULGGHQ WKH FRXQWHU
DUJXPHQWV FDVH E\ FDVH )XUWKHUPRUH QR YLDEOH DOWHUQDWLYHV KDYH EHHQ DYDLODEOH XQWLO
UHFHQWO\
0RWLYDWLRQIRUWKH7KHVLV
,QFUHDVLQJ FRPSOH[LW\ LQ WKH RSHUDWLQJ HQYLURQPHQW DQG WLJKWHQLQJ FRPSHWLWLRQ KDYH
IRUFHG 5 ' EDVHG FRPSDQLHV ²VXFK DV SKDUPDFHXWLFDOV WR LPSURYH WKHLU UHVRXUFH
DOORFDWLRQ PHWKRGV 7KH QHHG WR PRQLWRU WKH PDUNHW WKH FRPSHWLWRUV DQG WKH
SURJUHVVLRQRISURSULHWDU\5 'DFWLYLWLHVUHTXLUHVQHZWRROVDQGLQVRPHFDVHVDQHZ
PLQGVHWIRUWKHFRPSDQ\WRMXVWLI\LWVLQYHVWPHQWGHFLVLRQV
5HDO RSWLRQV PHWKRGRORJ\ LV RQH RI WKH QHZHVW DGYDQFHV LQ WKH WKHRU\ RI FDSLWDO
EXGJHWLQJDQGVWUDWHJLFPDQDJHPHQWWKDWKDVEHHQSURSRVHGWRUHFWLI\VRPHRIWKHIODZV
LQKHUHQW LQ WUDGLWLRQDO UHVRXUFH DOORFDWLRQ PHWKRGV 6LQFH WKH ODWH VHYHQWLHV DFDGHPLFV
KDYH EHHQ SURSRVLQJ WKLV PHWKRGRORJ\ DV DQ DOWHUQDWLYH WR WKH GLVFRXQWHG FDVKIORZ
7ULJHRUJLV / 5HDO 2SWLRQV ² 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH $OORFDWLRQ 0,7
3UHVVSSL[
0\HUV6&)LQDQFH7KHRU\DQG)LQDQFLDO6WUDWHJ\0LGODQG&RUSRUDWH)LQDQFH -RXUQDO 6SULQJ
SS
0\HUV 6 & 'HWHUPLQDQWV RI &RUSRUDWH %RUURZLQJ -RXUQDO RI )LQDQFLDO (FRQRPLFV 9RO
SS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 ',QWURGXFWLRQ
EDVHG PHWKRGV +RZHYHU WKH SUDFWLFDO DSSOLFDWLRQV KDYH EHHQ VORZ WR HPHUJH GXH WR
GLIILFXOWLHVLQUHFRJQL]LQJWKHIODZVLQRWKHUDSSURDFKHV,QFUHDVLQJO\WKRXJKFRPSDQLHV
LQVHYHUDOLQGXVWULHVKDYHEHJXQWRDFFHSWWKHJHQHUDOWHQHWVRIUHDORSWLRQVPHWKRGRORJ\
DQG KDYH VWDUWHG WR DSSO\ WKH WKHRU\ 7RGD\ WKH DSSOLFDWLRQV DUH EHFRPLQJ PRUH
ZLGHVSUHDG DV FRPSDQLHV KDYH EHHQ DEOH WR DGG LQVLJKW LQWR SURMHFW HYDOXDWLRQ E\
DSSO\LQJWKHWKHRU\0RVWSUREDEO\WKHUHDORSWLRQVPHWKRGRORJ\VRRQEHFRPHVRQHRI
WKHPDLQVWUHDPFDSLWDOEXGJHWLQJPHWKRGV
5HVHDUFK3UREOHPV
7KHREMHFWLYHVRIWKHWKHVLVDUH
7RFODULI\WKHFRQFHSWDQGDSSOLFDELOLW\RIUHDORSWLRQVPHWKRGRORJ\LQPDQDJHPHQWRISKDUPDFHXWLFDO
5 'SURMHFWV
7RFRPSDUHWKHPHWKRGRORJ\ZLWKWUDGLWLRQDO5 'YDOXDWLRQPHWKRGV
7RLGHQWLI\UHOHYDQWUHDORSWLRQVLQWKHSKDUPDFHXWLFDO5 'SURFHVVDQGWRSUHVHQWDQLPSURYHG
YDOXDWLRQPHWKRGRORJ\IRUHDFKRIWKHP
7RDSSO\WKHGHYHORSHGIUDPHZRUNLQDFDVHSURMHFWLQRUGHUWRGHPRQVWUDWHWKHDSSOLFDELOLW\RIWKH
WKHRU\
6FRSHRIWKH7KHVLV
7KHJRDORIWKHWKHVLVLVWRSUHVHQWDWKRURXJKDQDO\VLVRIWKHVWUHQJWKVDQGZHDNQHVVHV
RI WKH UHDO RSWLRQV PHWKRGRORJ\ DQG RI LWV DSSOLFDELOLW\ LQ WKH HYDOXDWLRQ RI
SKDUPDFHXWLFDO5 'SURMHFWV$Q5 'SURMHFWLVGHILQHGDVVWDUWLQJIURPWKHVFUHHQLQJ
RI SRWHQWLDO PROHFXOHV DQG FRPSRXQGV FRQWLQXLQJ WKURXJK WKH GLIIHUHQW GHYHORSPHQW
SKDVHVXQWLODQDSSURYHGGUXJLVUHDG\IRUVDOH
7KH HPSKDVLV RI WKLV WKHVLV LV RQ WKH ILQDQFLDO HYDOXDWLRQ RI D SKDUPDFHXWLFDO 5 '
SURMHFW$QLPSOLFLWDVVXPSWLRQRIDVLQJOHGHFLVLRQFULWHULXPLHWKHILQDQFLDOYDOXHRI
WKH SURMHFW LV WKHUHIRUH PDGH 7KLV GRHV QRW PHDQ WKDW WKH HIIHFW DQG LQWHUSOD\ RI
DOWHUQDWLYH GHFLVLRQ FULWHULD LQ GLIIHUHQW VWDJHV RI WKH 5 ' SURFHVV ZRXOG QRW EH
DFNQRZOHGJHG QRU LQFOXGHG LQ WKH DQDO\VLV $OWHUQDWLYH GHFLVLRQ FULWHULD VXFK DV WKH
VWUDWHJLFILWRIDSURMHFWDQGWKHRUJDQLVDWLRQDOFDSDELOLWLHVDUHWRXFKHGXSRQZKHQWKH
FRQWH[WSHUPLWVWKLV+RZHYHUSURRIVRIWKHUHVXOWVLQPRGHUQFRUSRUDWHILQDQFHDVVXPH
WKDWYDOXHPD[LPL]DWLRQLVWKHIXQGDPHQWDOREMHFWLYHRIDFRPSHWLWLYHILUP 7KHUHIRUH
WKLVDVVXPSWLRQLVDFFHSWHGDVDVWDUWLQJSRLQWLQWKLVWKHVLVWRR
7KHIRFXVRIWKHVWXG\LVRQWKHHYDOXDWLRQRIUHDORSWLRQVHPEHGGHGLQDVLQJOH5 '
SURMHFW7KLVPHDQVWKDWDFRPSUHKHQVLYHDQDO\VLVRIPRGHUQSRUWIROLRWKHRU\DQGRIDQ
86$7RGD\&RUSRUDWHH[HFVH[DPLQHVWUDWHJLFWRRO$QHZZD\WRDVVHVVULVNDUULYHV0D\
%XVLQHVV:HHN([SORLWLQJ8QFHUWDLQW\-XQH7DORXVHOlPl´0DKWDYDQ(SlYDUPDDµ1RYHPEHU
6HHIRUH[DPSOH&RSHODQG7$:HVWRQ-))LQDQFLDO7KHRU\DQG&RUSRUDWH3ROLF\UG(GLWLRQ
$GGLVRQ:HVOH\3XEOLVKLQJ
RSWLPDOSRUWIROLRPL[RIGLIIHUHQWSURMHFWVLVQRWLQFOXGHGLQWKHWKHVLV7KHLQWHUDFWLRQ
RIGLIIHUHQWUHDORSWLRQVLQWKHFRXUVHRIRQHSURMHFWLVLQFOXGHGLQWKHDQDO\VLVWKRXJK
0HWKRGRORJ\
7KH WKHVLV FRQVLGHUV D UHODWLYHO\ QHZ WKHRU\ LQ D SUDFWLFDO FRQWH[W 7KLV ZDUUDQWV D
FRPSUHKHQVLYHGLVFXVVLRQRISUHYLRXVZRUNDQGRISULRUDSSOLFDWLRQVLQUHODWHGILHOGV$
OLWHUDWXUHUHYLHZLVWKHUHIRUHSUHVHQWHG,QRUGHUWRHQVXUHUHDGDELOLW\WKHPRVWWHFKQLFDO
QRWHVDUHSRVWSRQHGWRWKHDSSHQGLFHV
2QWKHRWKHUKDQGVRPHDVSHFWVRIWKHDQDO\VLVDUHTXDOLWDWLYHDQGQHHGDPRUHSHUVRQDO
IDFHWRIDFH DSSURDFK 0RUH VSHFLILFDOO\ WKH LGHQWLILHG UHDO RSWLRQV LQ SKDUPDFHXWLFDO
5 'ZHUHYDOLGDWHGDQGWKHLULPSRUWDQFHZHUHUHILQHGLQGLVFXVVLRQVZLWKFDVHFRPSDQ\
SHUVRQQHO 7KH FRUH SDUW LQ WKH DQDO\VLV RI WKH FDVH SURMHFW LV WKH DSSOLFDWLRQ RI WKH
WKHRUHWLFDOPRGHOWRGHULYHDYDOXHIRUWKHLGHQWLILHGUHDORSWLRQVDQGIRUWKHSURMHFWDVD
ZKROH
6WXG\$SSURDFK
7KH WKHVLV DQG WKH DQDO\VLV DUH LQWHUGLVFLSOLQDU\ LQ QDWXUH 7KLV YLHZ VWHPV IURP WKH
JHQHUDODVVXPSWLRQVEHKLQGWKHUHDORSWLRQVPHWKRGRORJ\7KHURRWVRIWKHPHWKRGRORJ\
FDQEHWUDFHGWRRSWLRQYDOXDWLRQRIILQDQFLDODVVHWVLQSHUIHFWPDUNHWV7KDWWKHRU\RQ
LWV RZQ SDUW HPSOR\V WRROV IURP DGYDQFHG FDOFXOXV DQG IURP WKH WKHRU\ RI SDUWLDO
GLIIHUHQWLDO HTXDWLRQV 2Q WKH RWKHU KDQG PDQ\ DSSOLFDWLRQV RI UHDO RSWLRQV KDYH
EHQHILWHG IURP WKH WRROV RI GHFLVLRQ DQDO\VLV IRU H[DPSOH GHFLVLRQ WUHHV DQG LQIOXHQFH
GLDJUDPV)LQDOO\WKHILHOGRIWKHDSSOLFDWLRQLQWKHWKHVLVWKHSKDUPDFHXWLFDOVLQGXVWU\
EURDGHQV WKH YDULHW\ RI GLIIHUHQW ILHOGV WRZDUGV ELRVFLHQFHV $ PDMRU DGYDQWDJH RI WKH
LQWHUGLVFLSOLQDU\DSSURDFKLVWKHSRVVLELOLW\WREXLOGRQWKHNQRZOHGJHGUDZQIRUPHDFK
ILHOG DQG SRVVLEO\ FRPELQH VRPH RI WKH DSSDUHQWO\ VHSDUDWH FKDUDFWHULVWLFV WR FUHDWH
VRPHWKLQJQHZ
7KHDSSURDFKRIWKHVWXG\LVERWKGHVFULSWLYHDQGSUHVFULSWLYHLQQDWXUH7KHJRDOLVWR
DQDO\]H WKH ORJLF EHKLQG WKH UHDO RSWLRQ PHWKRGRORJ\ E\ VKRZLQJ LWV VWUHQJWKV DQG
OLPLWDWLRQV7KLVOHDGVWRDUHILQHGSLFWXUHRIUHVRXUFHDOORFDWLRQLQSKDUPDFHXWLFDO5 '
+RZHYHU WKH DSSOLFDELOLW\ RI WKH UHVXOWV VKRXOG QRW EH VDFULILFHG IRU WKH VDNH RI
WKHRUHWLFDOFRUUHFWQHVVRUUDPLILFDWLRQV7KHLGHDLVQRWWRFUHDWHDQRWKHU´EODFNER[µEXW
WR GHYHORS D WRRO WR VXSSRUW MXGJHPHQW LQ GHFLVLRQPDNLQJ $SSO\LQJ UHDO RSWLRQV
DQDO\VLV ZLOO H[SDQG WKH H[LVWLQJ IURQWLHU RI NQRZOHGJH E\ ORRNLQJ DW DQ XQFHUWDLQ
RSHUDWLQJHQYLURQPHQWLQDQRYHOZD\
6WUXFWXUHRIWKH7KHVLV
&KDSWHU WZR GHVFULEHV WKH NH\ FKDUDFWHULVWLFV LQ WKH SKDUPDFHXWLFDO 5 ' SURFHVV DQG
UHYLHZVWKHWUDGLWLRQDOPHWKRGRORJLHVLQWKHHYDOXDWLRQRI5 'SURMHFWV$FRPSDULVRQ
EHWZHHQ GLIIHUHQW YDOXDWLRQ PHWKRGRORJLHV LV FRQGXFWHG ZLWK WKH KHOS RI D QXPHULFDO
H[DPSOH 7KLV SDUW LV YLWDO LQ LGHQWLI\LQJ WKH OLPLWDWLRQV RI WKH WUDGLWLRQDO HYDOXDWLRQ
PHWKRGV 0RUHRYHU WKH VWUHQJWKV RI WKH UHDO RSWLRQV PHWKRGRORJ\ EHFRPH PRUH
DSSDUHQWRQFHWKHDUHDRIDSSOLFDWLRQLVLQWURGXFHGLQWKHEHJLQQLQJRIWKHWKHVLV
,Q WKH WKLUG FKDSWHU D GHILQLWLRQ RI WKH UHDO RSWLRQV DSSURDFK DQG WKH WKHRUHWLFDO
IRXQGDWLRQV RI WKH PHWKRGRORJ\ DUH SUHVHQWHG 7KH VXEVHTXHQW HODERUDWLRQ RI WKH
FRQFHSWZLOOEHOLQNHGWRWKHFKDUDFWHULVWLFVRISKDUPDFHXWLFDO5 'WRGHPRQVWUDWHWKH
YDOXHRIWKHPHWKRGRORJ\7KLVZLOOEHIROORZHGE\DFODVVLILFDWLRQDQGDQLGHQWLILFDWLRQ
RI UHOHYDQW UHDO RSWLRQV LQ D SKDUPDFHXWLFDO 5 ' SURMHFW ,Q WKH IROORZLQJ VHFWLRQV
GLIIHUHQWDSSURDFKHVWRWKHYDOXDWLRQRIWKHVHUHDORSWLRQVDUHSUHVHQWHGDQGGLVFXVVHG
7KH QHZ PHWKRGV DUH FRQWUDVWHG ZLWK WKH H[LVWLQJ DOWHUQDWLYHV DQG WKHLU DGGLWLRQDO
DGYDQWDJHVDUHVSHFLILFDOO\DUJXHGIRU&ULWLTXHRIWKHVXJJHVWHGQHZPHWKRGRORJ\LVDOVR
SUHVHQWHG
,Q FKDSWHU IRXU WKH UHOHYDQW UHDO RSWLRQV DUH PDSSHG ZLWK D YDOXDWLRQ PHWKRGRORJ\
7KHLU LPSDFW RQ GHFLVLRQPDNLQJ LQ GLIIHUHQW VWDJHV RI WKH 5 ' SURFHVV LV DGGUHVVHG
DQGGLIILFXOWLHVLQWKHDGRSWLRQRIWKHPHWKRGRORJ\LVGLVFXVVHG$IWHUWKLVSDUWDGHWDLOHG
PRGHO RI UHDO RSWLRQV WKHLU YDOXDWLRQ DQG WKHLU OLPLWDWLRQV LQ SKDUPDFHXWLFDO 5 ' LV
DYDLODEOH
,Q FKDSWHU ILYH D FDVHVWXG\ IRU DQ H[LVWLQJ 5 ' SURMHFW LV SUHVHQWHG WR VKRZ WKH
SUDFWLFDOLPSOLFDWLRQVRIWKHPRGHODQGWKHPHWKRGRORJ\7KHDQDO\VLVRIWKHFDVHEXLOGV
RQ WKH LQVLJKW DQG WKH UHVXOWV RI SULRU VWXGLHV 7KH LGHD LV WR WHVW WKH WKHRUHWLFDO
DUJXPHQWV LQ SUDFWLFH 7KH RXWFRPH LQFOXGHV D YDOXH IRU WKH SURMHFW DQG IRU LWV UHDO
RSWLRQVDVZHOODVVHQVLWLYLW\DQDO\VLVRINH\YDULDEOHV6LQFHWKHUHDORSWLRQPHWKRGRORJ\
EXLOGV RQ WKH UHVXOWV RI WKH WUDGLWLRQDO YDOXDWLRQ PHWKRGV D QXPHULFDO FRPSDULVRQ
EHWZHHQGLIIHUHQWDSSURDFKHVLVSUHVHQWHG$UHDOOLIHDSSOLFDWLRQZLOODOVRKLJKOLJKWWKH
OLPLWDWLRQVRIWKHWKHRU\LQDSUDFWLFDOZD\7KHFDVHDQDO\VLVJLYHVDVROLGXQGHUVWDQGLQJ
RIWKHSURVDQGFRQVRIWKHUHDORSWLRQVPHWKRGRORJ\
&KDSWHUVL[LQFOXGHVDGLVFXVVLRQRQWKHSHUIRUPHGDQDO\VLVDQGRQWKHUHVXOWVRIWKHFDVH
VWXG\7KHUHOLDELOLW\YDOLGLW\DQGOLPLWDWLRQVRIWKHDSSURDFKDUHDGGUHVVHG6XJJHVWLRQV
RQSRVVLEOHDSSOLFDWLRQVLQWKHRUJDQLVDWLRQRIWKHFDVHVWXG\DUHSUHVHQWHG
7KH VWUXFWXUH RI WKH WKHVLV FRPELQHG ZLWK WKH PHWKRGRORJ\ LV LOOXVWUDWHG LQ )LJXUH
EHORZ
$KRSHOWR70DXOD02OOLOD-,QYHVWPHQW8QGHU8QFHUWDLQW\&DVH1LWHFDSRQH+875LHJHO
6LPXODWLRQ7$,5HVHDUFK&HQWHU6LPXODWLRQ/DERUDWRU\+87
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 ',QWURGXFWLRQ
6WUXFWXUH 0HWKRGRORJ\
&KDSWHU &KDUDFWHULVWLFVRI
/LWHUDWXUH5HYLHZ
3KDUPDFHXWLFDO5 '
,QWURGXFWLRQRI /LWHUDWXUH5HYLHZ
&KDSWHU 5HDO2SWLRQV ,QWHUYLHZV
$VVHVVPHQWRI
&KDSWHU /LWHUDWXUH5HYLHZ
9DOXDWLRQ0HWKRGV
0HWKRGRORJLFDO 9DOLGDWLRQWKURXJK
&KDSWHU ,QWHUYLHZV
)UDPHZRUN
(PSLULFDO
&KDSWHU &DVH6WXG\
&DOFXODWLRQV
)LJXUH7KHVWUXFWXUHRIWKHWKHVLV
3+$50$&(87,&$/5 '
´(YHU\ZKHUH,ORRNLQWKHSKDUPDFHXWLFDOLQGXVWU\WRGD\,VHHLQFUHDVLQJFRPSOH[LW\DQGXQFHUWDLQW\µ
-XG\/HZHQW&)20HUFN&R
,QGXVWU\6WUXFWXUH
7KHSKDUPDFHXWLFDOLQGXVWU\LVGRPLQDWHGE\PXOWLQDWLRQDOJLDQWVZKRFRYHUHYHU\SDUW
RIWKHYDOXHFKDLQ7KHLUJRDOLVWRUHDOLVHWKHHFRQRPLHVRIVFDOHRIFRVWO\DQGOHQJWK\
5 'DFWLYLWLHVE\WDUJHWLQJVHYHUDOWKHUDSHXWLFDUHDVZLWKPXOWLSOHSURGXFWVLQVLGHHDFK
DUHDVLPXOWDQHRXVO\DQGJOREDOO\2QDYHUDJHSKDUPDFHXWLFDOFRPSDQLHVKDYHGHYHORSHG
SURGXFWV LQ HLJKW WKHUDSHXWLF DUHDV 7KH FRPSRVLWLRQ RI WKH GRZQVWUHDP SDUW RI WKH
YDOXH FKDLQ LV KLJKO\ PDUNHW DQG FRXQWU\VSHFLILF GHSHQGLQJ RQ UHJXODWLRQV
UHLPEXUVHPHQWSROLFLHVDQGPHGLFDOWUDGLWLRQVLQHDFKFRXQWU\,QJHQHUDOWKHFXVWRPHU
LQWHUIDFH LV VRPHZKDW XQRUWKRGR[ DV GRFWRUV SUHVFULEH GUXJV ZLWKRXW OHWWLQJ WKH
EHQHILFLDULHV LH PDQXIDFWXUHUV DQG SDWLHQWV LQIOXHQFH WKH GHFLVLRQ QRWLFHDEO\ 7KH
PXOWLQDWLRQDOV XVXDOO\ FRQWURO DOVR WKH PDUNHWLQJ DQG WKH UHWDLO GLVWULEXWLRQ RI QHZ
SURGXFWVVLQFHWKH\KDYHWKHUHVRXUFHVWRSXVKWKHDSSURYHGGUXJVLQWRJOREDOPDUNHWV
,QJHQHUDOPDUNHWVIRUSKDUPDFHXWLFDOSURGXFWVDFURVVWKHUDSHXWLFDUHDVDUHH[SHFWHGWR
JURZJOREDOO\LQWKHIXWXUHVLQFHWKHSRSXODWLRQRIWKHZRUOGLVDJLQJ
5HFHQW7UHQGV
*OREDOLVLQJ PDUNHWV KDYH KDG GHHS LPSDFW RQ WKH VWUXFWXUH RI WKH SKDUPDFHXWLFDO
LQGXVWU\ 'HDYHUDJLQJ RI WKH YDOXH FKDLQ DQG QHZ (8 GLUHFWLYHV DV ZHOO DV OHJLVODWLRQV
KDYH OHG FRPSDQLHV WR H[DPLQH WKHLU LQWHUQDO SURFHVVHV DQG 5 ' SRUWIROLRV
PHWLFXORXVO\ 2Q WKH RWKHU KDQG PHUJHUV EHWZHHQ DOUHDG\ VL]HDEOH SKDUPDFHXWLFDO
FRPSDQLHVDUHPRGLI\LQJWKHVKDSHRIWKHFRPSHWLWLYHODQGVFDSH 7KHKDUPRQLVDWLRQRI
WKH UHJXODWLRQV LV WDNLQJ SODFH JOREDOO\ SRVVLEO\ ZLWK WKH H[FHSWLRQ RI WKH -DSDQHVH
PDUNHW &RQFHUQLQJ 5 ' LWVHOI QHZ VFLHQWLILF PHWKRGV VXFK DV FRPELQDWRULDO
FKHPLVWU\ DQG WKH XVH RI '1$ FKLSV KDYH LQFUHDVHG WKH QXPEHU RI FDQGLGDWH
FRPSRXQGV DW HYHU\ VWDJH RI WKH 5 ' SURFHVV 0RUHRYHU WLJKWHQLQJ FRPSHWLWLRQ DQG
SXEOLFSUHVVXUHVIRUPRUHHIIHFLHQWDVZHOODVFRVWHIIHFWLYHSURGXFWVKDYHLQFUHDVHGWKH
UHODWLYHH[SHQGLWXUHVIRU5 '7KLVWUHQGLVLOOXVWUDWHGLQ)LJXUH
´6FLHQWLILF 0DQDJHPHQW DW 0HUFN $Q ,QWHUYLHZ ZLWK &)2 -XG\ /HZHQWµ +DUYDUG %XVLQHVV 5HYLHZ
-DQXDU\)HEUXDU\SS
´5 'SKLORVRSK\DQG PDQDJHPHQW LQ WKH ZRUOG·V OHDGLQJ SKDUPDFHXWLFDO FRPSDQLHVµ - 3KDUP 0HG
SS
7ZR ODWHVW ´PHJDPHUJHUVµ WDNLQJ SODFH EHWZHHQ +RHFKVW5KRQH3RXOHQF DQG 3KDUPDFLD 8SMRKQ
0RQVDQWR
7KH(FRQRPLVW$6XUYH\RIWKH3KDUPDFHXWLFDO,QGXVWU\6SHFLDO(GLWLRQ)HEUXDU\ VW
/LHYRQHQ-3KDUPDFHXWLFDOV)XWXUHLQ)LQODQG9775HSRUW0D\SS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
16 20
R&D Expenditures, $Bn 14 18
16
R&D as % of Sales
12
14
10 12
8 10
6 8
6
4
4
2 2
0 0
1975 1980 1985 1990 1995
Value % of Sales
)LJXUH(WKLFDOSKDUPDFHXWLFDO5 'H[SHQGLWXUHVIRU86EDVHGFRPSDQLHV
5 ' H[SHQGLWXUH UHODWLYH WR VDOHV KDV LQFUHDVHG IURP WR DOPRVW VLQFH HDUO\
V1RQHWKHOHVVWKHLQFUHDVHGLQYHVWPHQWVKDYHQRWUHVXOWHGLQFRPSDUDEOHJURZWKLQ
WKHQXPEHURISURGXFWDSSURYDOV
$OO WKHVH WUHQGV KDYH OHG FRPSDQLHV WR VSHFLDOLVH DQG IRFXV WKHLU 5 ' DFWLYLWLHV PRUH
LQWHQVHO\)RULQVWDQFHQXPHURXVVPDOOELRWHFKFRPSDQLHVWKDWVSHFLDOLVHLQGHYHORSLQJ
GUXJV RQO\ IRU D VSHFLILF GHYHORSPHQW SKDVH KDYH HPHUJHG 2Q WKH RWKHU KDQG WKH
VHOOLQJ DQG WKH GLVWULEXWLRQ RI DSSURYHG GUXJV KDYH FRQFHQWUDWHG LQ WKH KDQGV RI
PXOWLQDWLRQDOV2QHH[SODQDWLRQEHKLQGWKH´PHUJHUPDQLDµKDVEHHQWKHQHHGWRDFTXLUH
FULWLFDOPDVVWRVXSSRUWWKHKLJK5 'H[SHQVHVLQPXOWLSOHWKHUDSHXWLFDUHDV,QJHQHUDO
WKHQHWZRUNHGHFRQRP\KDVUHDFKHGWKHSKDUPDFHXWLFDOLQGXVWU\DV5 'SDUWQHUVKLSV
DQGVWUDWHJLFDOOLDQFHVEHWZHHQFRPSDQLHVRIDOOVL]HVDUHFRPPRQSODFH
8QFHUWDLQW\LVXELTXLWRXVDQGKDVPXOWLSOHFDXVHVLQDQ\W\SHRI5 'DFWLYLWLHV7KLVLV
HYHQPRUHWKHFDVHLQWKHSKDUPDFHXWLFDOVLQGXVWU\ZKHUHWKHOHQJWKRIWKH5 'SURFHVV
IRU D VLQJOH SURGXFW YDULHV IURP WR \HDUV 2I WKH KXQGUHGV RI WKRXVDQGV RI
PROHFXOHVWKDWHQWHUWKHILUVWVWDJHVRIWKH5 'SURFHVVIHZHUWKDQLQUHDFKWKH
PDUNHW (VWLPDWHVIRUWKHFRVWRIEULQJLQJDQHZFKHPLFDOHQWLW\1&(WRWKHPDUNHW
YDU\EHWZHHQ²PLOOLRQRI86'GHSHQGLQJRQVRXUFHDQGPHWULFVXVHG
6RXUFH'DWDPRQLWRU
7KLV VWDWHPHQW KDV EHHQ SUHVHQWHG LQ YDULRXV DUWLFOHV LQ UHFHQW VSHFLDOL]HG SXEOLFDWLRQV LQ SDUWLFXODU
´3KDUPDEXVLQHVV 7KH ,QWHUQDWLRQDO 0DJD]LQH RI 3KDUPDFHXWLFDO %XVLQHVVµ 1R 1RYHPEHU
'HFHPEHU(XURPRQH\3XEOLFDWLRQV3/&
´5 'SKLORVRSK\DQGPDQDJHPHQWLQWKHZRUOG·VOHDGLQJSKDUPDFHXWLFDOFRPSDQLHVµ-3KDUP0HG
SS
'DWDPRQLWRU/HKPDQ%URWKHUV´1HZ'UXJ'LVFRYHU\7HFKQRORJLHVµ
6HHIRUH[DPSOH/LHYRQHQ-3KDUPDFHXWLFDOV)XWXUHLQ)LQODQG9775HSRUW0D\SS
/HKPDQ %URWKHUV ¶1HZ 'UXJ 'LVFRYHU\ 7HFKQRORJLHV· RU 1LFKROV 1 $ 6FLHQWLILF
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
$ GLIIHUHQWLDWLQJ FKDUDFWHULVWLF RI SKDUPDFHXWLFDO 5 ' IURP RWKHU LQGXVWULHV LV WKH
UHJXODWRU\FRQWUROWKDWJRYHUQVWKHZKROHSURFHVV7KH5 'DFWLYLWLHVDUHKDUQHVVHGE\
HWKLFDO JRRGSUDFWLFH JXLGHOLQHV GXULQJ GHYHORSPHQW HJ ODERUDWRU\ FOLQLFDO DV ZHOO DV
PDQXIDFWXULQJDQGUHJXODWRU\JXLGHOLQHV7KHVHUHJXODWRU\UHTXLUHPHQWVKDYHSURIRXQG
HIIHFWVRQWKHUHVHDUFKDQGGHYHORSPHQWZRUNLWVHOIDVZHOODVWRFDSLWDOEXGJHWLQJDV
WKHLQKHUHQWO\LQQRYDWLYHDQGUDQGRPSURFHVVEHFRPHVPRUHLQFUHPHQWDODQGVWUXFWXUHG
7KH VHSDUDWH VWDJHV RI WKH 5 ' SURFHVV ZLWK VKRUW H[SODQDWLRQV DUH JLYHQ LQ 7DEOH
EHORZ
7DEOH'HILQLWLRQDQGH[SODQDWLRQRIWKHGLIIHUHQWVWDJHVLQSKDUPDFHXWLFDO5 'SURFHVV
7KH ´FRVWVµ RI D SXEOLF UHJXODWRU\ SURFHVV DUH ORQJ GHYHORSPHQW WLPHV DQG ODUJH
PRQHWDU\ H[SHQGLWXUH ([SHQGLWXUHV SHU DSSURYHG SURGXFW DUH PDJQLILHG E\ WKH FRVWV
WKDWZHUHLQFXUUHGZKHQGHYHORSLQJSURGXFWVWKDWQHYHUPDGHLWWRWKHPDUNHW7KLVIDFW
DQG RWKHU UHOHYDQW GDWD RQ FRVWV GHYHORSPHQW WLPHV DQG RQ VXFFHVV SUREDELOLWLHV
FROOHFWHGIURPWZRLQGHSHQGHQWVRXUFHVDUHSUHVHQWHGLQ7DEOH,WLVHYLGHQWWKDWWKH
0DQDJHPHQWDW0HUFN$Q,QWHUYLHZZLWK&)2-XG\/HZHQW+DUYDUG%XVLQHVV5HYLHZ-DQXDU\)HEUXDU\
SS
+DOOLGD\5*/XPOH\&(:DONHU657KH$OORFDWLRQRI5HVRXUFHVIRUWKH:RUOG·V/HDGLQJ
3KDUPDFHXWLFDO&RPSDQLHV5 '0DQDJHPHQW9ROSS
H[WUHPHO\ ORZ KLW UDWH LV RQH RI WKH IDFWRUV WKDW PDNHV SKDUPDFHXWLFDO 5 ' VR
H[SHQVLYH,WLVKDUGWRLPDJLQHDQRWKHULQGXVWU\ZKHUHSURGXFWVZLWKFXPXODWLYHFRVWV
RI KXQGUHGV RI PLOOLRQV RI GROODUV DUH GLVFDUGHG LQ FDVH RI D UHJXODWRU\ GLVPLVVDO ZLWK
FRVWVZULWWHQRIIDVVXQN
7DEOH 7ZR UHFHQW HVWLPDWHV RQ FRVW GXUDWLRQ DQG VXFFHVV SUREDELOLWHV LQ GLIIHUHQW SKDVHV RI
SKDUPDFHXWLFDO5 '
7KH5 'SURFHVVLVORQJFRPSDUHGWRDQ\RWKHULQGXVWU\,QIDFWSURMHFWFKDPSLRQVLQ
SKDUPDFHXWLFDO 5 ' XVXDOO\ PDQDJH RQO\ SURMHFWV GXULQJ WKHLU HQWLUH FDUHHUV
SURYLGHGRIFRXUVHWKDWWKHSURMHFWVSURFHHGDVSODQQHG6HFRQGO\LWLVLPSRUWDQWWRJHW
DQLQLWLDOJUDVSRIWKHFRVWVWUXFWXUHEHWZHHQGLIIHUHQWSKDVHV(DUO\VWDJHVDUHUHODWLYHO\
LQH[SHQVLYHDQGWKHKHDY\H[SHQGLWXUHVDUHLQFXUUHGRQO\DIWHUSURJUHVVLQJWRSKDVH,,,
6SHFLDO&KDUDFWHULVWLFVRIWKH3URFHVV
7KH'LIIHUHQW&RPSRQHQWVRI7RWDO5LVN
(VVHQWLDO LQ HVWLPDWLQJ IXWXUH UHYHQXHV IURP D FDQGLGDWH GUXJ LQ GHYHORSPHQW LV WKH
LGHQWLILFDWLRQDQGLQFOXVLRQRIDOOUHOHYDQWULVNVLQWKHFDOFXODWLRQV$VWDQGDUGDSSURDFK
LVWRGLYLGHWKHWRWDOULVNLQWRHFRQRPLFDQGWHFKQLFDOFRPSRQHQWV
(FRQRPLFULVNFRQVLVWVRIRYHUDOOIDFWRUVLQFUHDVLQJXQFHUWDLQW\LQWKHPDUNHWSODFHVXFKDV
LQWHUHVW UDWHV LQIODWLRQ FKDQJHV LQ UHJXODWLRQ RU LQGXVWU\ SULFHV (FRQRPLF ULVN LV
V\VWHPDWLFLQWKHVHQVHWKDWLWLVH[RJHQRXVWRWKHSURMHFWLHWKHFRPSDQ\FDQQRWDIIHFWLW
6LQFHLWLVIXOO\GLYHUVLILDEOHLQYHVWRUVDUHQRWZLOOLQJWRSD\DSUHPLXPIRULW,QFDSLWDO
6RXUFH'DWDPRQLWRU/HKPDQ%URWKHUV¶1HZ'UXJ'LVFRYHU\7HFKQRORJLHV·
0\HUV6&+RZH&'$/LIH&\FOH)LQDQFLDO0RGHORI3KDUPDFHXWLFDO5 '5HVHDUFK3DSHU
6ORDQ6FKRRORI0DQDJHPHQW0,7
'L[LW$.3LQG\FN56,QYHVWPHQW8QFHU8QFHUWDLQW\3ULQFHWRQ8QLYHUVLW\3UHVVSS
$PUDP0.XODWLODND15HDO2SWLRQV²0DQDJLQJ6WUDWHJLF,QYHVWPHQWLQDQ8QFHUWDLQ:RUOG
+DUYDUG%XVLQHVV6FKROO3UHVV%RVWRQ0DVVDFKXVHWWVSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
EXGJHWLQJHFRQRPLFULVNJLYHVPDQDJHUVDQLQFHQWLYHWRSRVWSRQHLQYHVWPHQWGHFLVLRQV
DVVRPHPDUNHWULVNLVDOZD\VUHVROYHGZLWKWKHXQIROGLQJRIIXWXUHHYHQWV
7HFKQLFDOULVNLQFOXGHVDOOWKHIDFWRUVWKDWDUHHQGRJHQRXVWRWKHSURMHFW,QSKDUPDFHXWLFDO
5 ' WKHVH LQFOXGH WKH SUREDELOLWLHV RI UHJXODWRU\ DSSURYDOV XQFHUWDLQW\ RYHU
GHYHORSPHQW DQG PDQXIDFWXULQJ FRVWV DQG DFWLRQV RI FRPSHWLWRUV 7HFKQLFDO ULVN LV
RIWHQ UHIHUUHG WR DV SULYDWH RU XQV\VWHPDWLF EHFDXVH LW LV QRW UHODWHG WR PDUNHWSULFHG
YDULDEOHVDQGWKHUHIRUHLWVFXPXODWLYHOHYHORYHUDOOSRUWIROLRLQYHVWPHQWVGHWHUPLQHVWKH
RYHUDOO ULVNLQHVV RI WKH FRPSDQ\ 7HFKQLFDO ULVN LV VWDWLF LQ QDWXUH VLQFH LW ZLOO UHVROYH
RQO\ZKHQDSURMHFWLVH[HFXWHG&RQWUDU\WRHFRQRPLFULVNWKHUHH[LVWVDQLQFHQWLYHQRW
WRZDLWEHIRUHLQYHVWLQJVLQFHXQFHUWDLQW\LVUHVROYHGRQO\DVWKHSURMHFWSURFHHGV7KLV
YDOXH RI QHZ LQIRUPDWLRQ ZKLFK LV XVXDOO\ RPLWWHG IURP ILQDQFLDO HYDOXDWLRQ LV
VRPHWLPHVFDOOHGWKHVKDGRZYDOXHRIOHDUQLQJ ,WVKRXOGEHQRWHGWKDWZKHUHDVHFRQRPLF
ULVNLVUHODWLYHO\VWDEOHRYHUDFHUWDLQSHULRGRIWLPHWHFKQLFDOULVNLQGLIIHUHQWVWDJHVRIDQ
5 'SURMHFWYDULHVVXEVWDQWLDOO\7KLVYDULDWLRQLVPDJQLILHGLQSKDUPDFHXWLFDO5 'E\
ORQJGHYHORSPHQWWLPHVDQGDORZSUREDELOLW\IRUFXPXODWLYHVXFFHVV,QHDUO\VWDJHVWKH
ULVNLVPRVWO\SULYDWHZKHUHDVPDUNHWULVNVWDUWVWRGRPLQDWHFORVHUWRFRPPHUFLDOLVDWLRQ
7KHFRPSRVLWLRQRIRYHUDOOULVNIRUDSKDUPDFHXWLFDO5 'SURMHFWLVGHVFULEHGLQ)LJXUH
EHORZ
.DOOEHUJ*/DXULQ35HDO2SWLRQVLQ5 '&DSLWDO%XGJHWLQJ²$&DVH6WXG\DW3KDUPDFLD
8SMRKQ0DVWHU·V7KHVLV*RWKHQEXUJ6FKRRORI(FRQRPLFVDQG&RPPHUFLDO/DZSS
/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
5HJXODWRU\ &RQVXPHU
$SSURYDO %HKDYLRXU
3UREDELOLWLHV
5HJXODWLRQV
'HYHORSPHQW&RVWV
3ROLWLFDO
(QYLURQPHQW
0DQXIDFWXULQJ&RVWV
([FKDQJH5DWHV
$FWLRQVRI
&RPSHWLWRUV ,QWHUHVW5DWHV
7HFKQLFDO5LVN (FRQRPLF5LVN
3ULYDWH 0DUNHW
8QV\VWHPDWLF 6\VWHPDWLF
(QGRJHQRXV ([RJHQRXV
0RUHYDULDEOH 0RUHVWDEOH
727$/5,6.
)LJXUH$FRQFHSWXDOPRGHORIGLIIHUHQWFRPSRQHQWVRIWRWDOULVNLQSKDUPDFHXWLFDO5 '
$ FRQVHTXHQFH RI ORQJ SURGXFW GHYHORSPHQW WLPHV LV WKH QHHG IRU IOH[LELOLW\ LQ
PDQDJHULDO GHFLVLRQPDNLQJ 7KH UHVRXUFH DOORFDWLRQ GHFLVLRQV WDNH SODFH LQFUHPHQWDOO\
DIWHU HDFK GHYHORSPHQW SKDVH ZLWK DGGLWLRQDO FDSLWDO LQMHFWLRQV DSSURYHG RQO\ LI WKH
SURGXFW IXOOILOOV VSHFLILF WHKQLFDO DQG HFRQRPLF FULWHULD 7KH UHJXODWRU\ VDIHW\ FKHFNV DW
ZHOOHVWDEOLVKHGLQWHUYDOVSURYLGHQDWXUDOFRQWUROSRLQWVIRULQWHUQDOSURMHFWFRQWLQXDWLRQ
GHFLVLRQV7KHNH\LVVXHUHPDLQVLQVHOHFWLQJFRUUHFWWHFKQLFDODQGHFRQRPLFFULWHULDWKDW
MXVWLI\WKHFRQWLQXDWLRQGHFLVLRQIRUDVLQJOHSURMHFW,IDSURMHFWLVVHHQDVDYLDEOHRQH
WKH DPRXQW RI UHVRXUFHV DOORWWHG KDV WR EH GHWHUPLQHG WRR 2IWHQ WKH PRVW GLIILFXOW
SUREOHP LV WR GHFLGH KRZ PXFK VKRXOG EH SXW DW VWDNH DW D FHUWDLQ SKDVH RI WKH
GHYHORSPHQW 7KHSUREOHPDWLFVLQGHFLVLRQPDNLQJDUHLOOXVWUDWHGLQ)LJXUH
6KDUS 3 .HHOLQ 7 +RZ 6PLWK.OLQH %HHFKDP 0DNHV %HWWHU 5HVRXUFH $OORFDWLRQ 'HFLVLRQV
+DUYDUG%XVLQHVV5HYLHZ0DUFK$SULOSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
)LJXUH3UREOHPDWLFVLQPDQDJHULDOGHFLVLRQPDNLQJLQSKDUPDFHXWLFDO5 '
$QRWKHU LPSRUWDQW LVVXH LV ILQGLQJ WKH RSWLPDO ´FRQYHUJHQFHµ IRU WKH SURMHFW 7KH
FRQYHUJHQFH PHDQV WKDW E\ FKRRVLQJ D GHYHORSPHQW GLUHFWLRQ IRU WKH QH[W SKDVH WKH
QXPEHU RI SRVVLEOH WDUJHW SURGXFW SURILOHV GHFUHDVHV 'HFLVLRQ PDNLQJ DQG ILQDQFLDO
HYDOXDWLRQ WRROV DUH QHHGHG ZKHUH WKLV FRQYHUJHQFH LV PRVW UDSLG DQG RSWLRQV DUH VWLOO
RSHQ $ NH\ ILQGLQJ LQ UHFHQW VWXGLHV RI WKH FDVH FRPSDQ\ LV WKDW PRVW RI WKH
FKDUDFWHULVWLFVRIWKHWDUJHWSURGXFWEHFRPHIL[HGZKHQHQWHULQJSKDVH,,WULDOV,QRWKHU
ZRUGVSURGXFWFKDUDFWHULVWLFVVXFKDVLQGLFDWLRQGRVLQJDQGIRUPXODWLRQDUHGLIILFXOWWR
DOWHUZLWKRXWUHFRQGXFWLQJSKDVH,,VWXGLHVLHUHYHUWLQJWKHZKROHSURMHFW
$OWKRXJKDIXQGDPHQWDOWHQHWRIDFRPSHWLWLYHILUPLVSURILWPD[LPL]DWLRQVRPHRWKHU
FRQVLGHUDWLRQV ZDUUDQW DGGLWLRQDO GHFLVLRQ FULWHULD LQ 5 ' GHFLVLRQ PDNLQJ 7KHVH
LQFOXGHIRUH[DPSOHRUJDQLVDWRULDOFDSDELOLWLHVSURMHFWFKDPSLRQDWWULEXWHVVWUDWHJLFILW
DQGFXPXODWLYHULVNLQHVVRIWKHSURMHFW ,IDSURILWDEOHSURMHFWVLPSO\GRHVQ·WILWLQWKH
FRPSDQ\ SURGXFW SRUWIROLR RU LI FRPSHWHQW KXPDQ UHVRXUFHV DUH QRW DYDLODEOH WKH
SURMHFWPD\EHDEDQGRQHGRUVROGRXW&KDUDFWHULVWLFWRSKDUPDFHXWLFDO5 'LVWRVWUHVV
WKH FHUWDLQW\ RI VXFFHVVIXO GHYHORSPHQW UHVXOWV LQ HDUO\ VWDJH 5 ' DW WKH H[SHQVH RI
SURGXFWSURILWDELOLW\ 7KLVVWHPVIURPWKHGLIILFXOW\RIPDNLQJUHOLDEOHVDOHVSURMHFWLRQV
ZKHQPDUNHWODXQFKLVIDULQWKHIXWXUH+RZHYHULIWKHSURGXFWUHDFKHVWKHILQDOVWDJHV
RI WKH GHYHORSPHQW SURFHVV HFRQRPLF FRQVLGHUDWLRQV EHFRPH PRUH LPSRUWDQW 7KH
UHODWLYHHPSKDVLVRIYDU\LQJGHFLVLRQFULWHULDLVLOOXVWUDWHGLQ)LJXUH1RWHWKDWWKHVKLIW
LQWKHLPSRUWDQFHRIGHFLVLRQFULWHULDLVVW\OL]HGLQWKLVILJXUHEHLQJJHQHUDOO\SURMHFWDQG
WKHUDSHXWLFDUHDVSHFLILF
,GHDIRUH[KLELWVWHPPHGIURPLQWHUYLHZ0U7LPR$KRSHOWR
/RFNHWW * $OLL 0RGHOLQJ 6WUDWHJLF 'HFLVLRQ 0DNLQJ DQG 3HUIRUPDQFH 0HDVXUHPHQWV DW ,&,
3KDUPDFHXWLFDOV,QWHUIDFHV1RYHPEHU'HFHPEHUSS
.LULDNRV9ODKRV/RQGRQ%XVLQHVV6FKRRO
Economic
Considerations
Technical
Considerations
ch
I
II
III
al
e
ic
un
as
e
as
lin
as
La
Ph
Ph
ec
Ph
Pr
)LJXUH,OOXVWUDWLRQRIWLPHGHSHQGHQWGHFLVLRQFULWHULDLQSKDUPDFHXWLFDO5 '
7KLVVHFWLRQZLOOLQWURGXFHWKHWUDGLWLRQDOPHDQVIRUHYDOXDWLQJLQYHVWPHQWRSSRUWXQLWLHV
LQSKDUPDFHXWLFDO5 ',QWKLVWKHVLVWUDGLWLRQDOYDOXDWLRQPHWKRGVDUHGHILQHGDVWKRVH
OLVWHG LQ 7DEOH EHORZ ,Q RUGHU WR FODULI\ WKH GLIIHUHQFHV D QXPHULFDO H[DPSOH LV
FRQVWUXFWHGDQGSUHVHQWHG
/LVWRIWKH'LIIHUHQW0HWKRGV
7DEOH7KHWUDGLWLRQDOPHWKRGVIRUWKHYDOXDWLRQRILQYHVWPHQWRSSRUWXQLWLHV
0(7+2' (;3/$1$7,21
1HW3UHVHQW9DOXH (VWLPDWH DOO SHULRGLF IXWXUH FDVKIORZV DQG GLVFRXQW WKHP WR WKH
%DVHG RQ LQWHUYLHZ ZLWK .LULDNRV 9ODKRV /RQGRQ %XVLQHVV 6FKRRO 9DOLGDWLRQ E\ (VD 6RSSL 2ULRQ
3KDUPD
)RUDFRPSDULVRQEHWZHHQWKHVHWRROVDQGWKH139PHWKRGVHHFKDSWHULQ%UHDOH\5$0\HUV6&
3ULQFLSOHVRI&RUSRUDWH)LQDQFH (GLWLRQ0F*UDZ+LOO
WK
SRVLWLYH
5LVN5HWXUQ 8VHDGHFOLQLQJGLVFRXQWUDWHWKDWUHIOHFWVGHFUHDVLQJWRWDOSURMHFW
6WDLUFDVH ULVN DV 5 ' SURJUHVVHV $ JDS EHWZHHQ WKH ULVNLQHVV RI IXWXUH
FRVWVDQGUHYHQXHVFUHDWHVUHODWLYHO\KLJKHUULVNLH5 'OHYHUDJH
LQWR HDUO\VWDJH 5 ' LQYHVWPHQWV 7KLV JDS EHFRPHV QDUURZHU
DV5 'SURJUHVVHVGHFUHDVLQJWRWDOSURMHFWULVNDFFRUGLQJO\
'HFLVLRQ7UHH 0DS RXW DOO IHDVLEOH DOWHUQDWLYH PDQDJHULDO DFWLRQV FRQWLQJHQW RQ
$QDO\VLV WKH SRVVLEOH VWDWHV RI QDWXUH FKDQFH HYHQWV LQ D KLHUDUFKLFDO
PDQQHU 5ROOEDFNWKHWUHHWRDUULYHDWDGLVFRXQWHGSUHVHQWYDOXH
6LPXODWLRQ 0RGHO DOO FDXVHHIIHFW UHODWLRQVKLSV LQ WKH 5 ' SURFHVV XVLQJ
0HWKRGV GLVWULEXWLRQVDQGSRLQWHVWLPDWHVIRUWKHLQFOXGHGYDULDEOHV 8VH
6FHQDULR3ODQQLQJ &UHDWH D FHUWDLQ QXPEHU RI HJ WKUHH HVWLPDWHV RI WKH SRVVLEOH
RXWFRPHVRIDVLQJOHYDULDEOHDQGSHUIRUPFDOFXODWLRQVIRUHDFKRI
WKHVFHQDULRV,QHVVHQFHD´VLQJOHSDUDPHWHUVLPXODWLRQµ
,QIOXHQFH 3LQSRLQWJUDSKLFDOO\WKHNH\UHODWLRQVEHWZHHQWKHPRVWLPSRUWDQW
'LDJUDPV YDULDEOHV WKDW LQIOXHQFH WKH XQFHUWDLQ RXWFRPH (VVHQWLDOO\ D
FRQFHSWXDODQGDFRQFLVHLQWHUSUHWDWLRQRIDGHFLVLRQWUHH
8WLOLW\7KHRU\ 0RGHOWKHGHFLVLRQPDNHUV·VSUHIHUHQFHVH[SOLFLWO\DQGGHILQHWKH
6FRULQJ7DEOHV GHFLVLRQ FULWHULD ZKLFK PD\ EH PRQHWDU\ RU QRW 6XP XS WKH
SRLQWV IURP HYHU\ DWWULEXWH FODVV WR UHDFK WKH DJJUHJDWH XWLOLW\
VFRUH
0\HUV6&)LQDQFH7KHRU\DQG)LQDQFLDO6WUDWHJ\0LGODQG&RUSRUDWH)LQDQFH-RXUQDO6SULQJ
SS
)RUDFRPSUHKHQVLYHWUHDWPHQWVHH0\HUV6&+RZH&'$/LIH&\FOH)LQDQFLDO0RGHORI
3KDUPDFHXWLFDO5 '5HVHDUFK3DSHU6ORDQ6FKRRORI0DQDJHPHQW0,7
)RUPDOO\5 'OHYHUDJHFDQEHFDOFXODWHGIURPWKHIROORZLQJIRUPXOD
U
U U U >39)XWXUHFRVWV139@ZKHUHU
LVWKHFRVWRIFDSLWDOIRUWKHRYHUDOOSURMHFWU LV
QU QU IF QU
GHWHUPLQHGE\WKHULVNRILQYHVWPHQWLQDGUXJWKDWKDVUHFHLYHGPDUNHWDSSURYDODQGU LVWKHGLVFRXQW IF
UDWHIRUIXWXUHFRVWV,WVKRXOGEHQRWHGKRZHYHUWKDW0\HUVDQG+RZHDUHXQDEOHWRSURYLGHDQREMHFWLYH
PHWKRGWRHVWLPDWHYDOXHVIRUU DQGU QU IF
7ULJHRUJLV / 5HDO 2SWLRQV 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH $OORFDWLRQ 0,7
3UHVVSS
)RUDQDSSOLFDWLRQVHH$KRSHOWR70DXOD0 2OOLOD-'HFLVLRQ0DNLQJ8QGHU8QFHUWDLQW\
&DVH1LWHFDSRQH+87'HSDUWPHQWRI,QGXVWULDO0DQDJHPHQW
)RUDQDSSOLFDWLRQVHH&RRSHU.6KLQNILHOG'7KH3KDUPDFHXWLFDO 3RUWIROLR 1DYLJDWLQJ DQ
8QFHUWDLQ)XWXUH6FULS0DJD]LQH1RYHPEHUSS
$ V\VWHPG\QDPLF DSSURDFK WR VLPXODWLRQ LV WDNHQ LQ %XQFK 35 6FKDFKW $ $JJUHJDWH
5HVRXUFH0RGHOVIRUWKH3KDUPDFHXWLFDO5HVHDUFKDQG'HYHORSPHQW3URFHVV5HVHDUFK3DSHU(OL/LOO\DQG
&RPSDQ\
7KLVYDOXDWLRQDSSURDFKLVWKHVWDQGDUGWRROLQXVHDW2ULRQ3KDUPD
)RUDQDSSOLFDWLRQVHH&KDUQHV-0'HPLUHU5.HOORJJ'9DOXDWLRQRID%LRWHFKQRORJ\)LUP
$Q$SSOLFDWLRQRI5HDO2SWLRQV0HWKRGRORJLHV5HVHDUFK3DSHUSUHVHQWHGDWWKH $QQXDO5HDO2SWLRQV UG
&RQIHUHQFH-XQH7KH1HWKHUODQGV
)RU D VHPLQDO H[SRVLWLRQ VHH YRQ 1HXPDQQ - DQG 0RUJHQVWHUQ 2 7KHRU\ RI *DPHV DQG
(FRQRPLF%HKDYLRU3ULQFHWRQ1-3ULQFHWRQ8QLYHUVLW\3UHVV
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
$Q,OOXVWUDWLRQ
,QRUGHUWRLOOXVWUDWHWKHFKDUDFWHULVWLFVRIHDFKRIWKHVHYDOXDWLRQPHWKRGVDQH[DPSOHLV
SUHVHQWHG7KHLQYHVWPHQWRSSRUWXQLW\ DW KDQG LV WZRVWDJHG FRQVLVWLQJ RI SKDVH ,,,$
DQGWKHSRVVLEOHIROORZLQJSKDVH,,,%VWXGLHVDIWHUZKLFKWKHGUXJLVDVVXPHGWREHUHDG\
IRU UHJXODWRU\ILOLQJDQGPDUNHWLQJ 7KH HVWLPDWHG FRVWV UHYHQXHV DQG SUREDELOLWLHV DUH
PRGHOHGLQDGHFLVLRQWUHHLQ)LJXUH7KHGHYHORSPHQWLVDVVXPHGWREHGHWHUPLQLVWLF
LQWKHVHQVHWKDWWKHWHFKQLFDOVXFFHVVSUREDELOLW\LV
6723
6723
)LJXUH$K\SRWKHWLFDOH[DPSOHRIDQLQYHVWPHQWRSSRUWXQLW\LQWKHSKDUPDFHXWLFDOLQGXVWU\ ´0µ
VWDQGVIRUPLOOLRQ
3KDVH ,,,$ VWXGLHV DUH DVVXPHG WR EH KLJKO\ SURPLVLQJ DYHUDJH RU EHORZ H[SHFWDWLRQV
ZLWKSUREDELOLWLHVRIDQGUHVSHFWLYHO\$IWHUWKHVHVWXGLHVWKHGHFLVLRQ
PDNHUVKRXOGGHFLGHZKHWKHUWRFRQWLQXHWRSKDVH,,,%RUQRW7KHFOLQLFDOUHVXOWVIURP
SKDVH,,,%FDQOHDGWRWZRGLIIHUHQWVDOHVHVWLPDWHVGHSHQGLQJRQSKDVH,,,$UHVXOWV7KH
HVWLPDWHV YDU\ EHWZHHQ 0 DQG ²0 7KH SUREDELOLWLHV IRU WKH GLIIHUHQW RXWFRPHV
IURPSKDVH,,,%DUHDVVXPHGWREHNQRZQ
7KH YDOXDWLRQV IRU WKH LQYHVWPHQW RSSRUWXQLW\ XVLQJ WKH WUDGLWLRQDO PHWKRGV DUH
SUHVHQWHGLQ7DEOHEHORZ2SSRUWXQLW\FRVWRIFDSLWDORILVXVHG$SUHOLPLQDU\
UHDORSWLRQYDOXDWLRQLVLQFOXGHGLQWKHHQG
$GDSWHG IURP )DXONQHU 7 : $SSO\LQJ ¶2SWLRQV 7KLQNLQJ· WR 5 ' 9DOXDWLRQ 5HVHDUFK
7HFKQRORJ\0DQDJHPHQW0D\-XQHSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
7DEOH5HVXOWVIURPWKHYDOXDWLRQXVLQJWUDGLWLRQDOPHWKRGVDQGVLPSOLVWLFUHDORSWLRQORJLF
7KHVWDQGDUGQHWSUHVHQWYDOXHLVDFKLHYHGE\XVLQJWKHFDVKIORZHVWLPDWHVRIWKHPRVW
OLNHO\UHDOLVDWLRQVIRUWKHXQFHUWDLQYDULDEOHV$QRSSRUWXQLW\FRVWRIFDSLWDOLVXVHG
7KH PRGLILFDWLRQV LQ WKH ¶ULVNUHWXUQ VWDLUFDVH· DSSURDFK DUH WKH VPDOOHU GLVFRXQW UDWH
XVHG IRU GLVFRXQWLQJ WKH LQYHVWPHQW FRVWV DQG WKH LQFOXVLRQ RI DOO SRVVLEOH VDOHV
UHDOLVDWLRQV ZHLJKWHG E\ UHVSHFWLYH SUREDELOLWLHV 7KH VPDOOHU GLVFRXQW UDWH IRU
GLVFRXQWLQJ LQYHVWPHQW FRVWV UHIOHFWV PRUH SUREDEOH UHDOLVDWLRQ RI FRVWV YV H[SHFWHG
UHYHQXHV7KHGHFLVLRQWUHHDQDO\VLV'7$XVHVDFRQVWDQWGLVFRXQWUDWHDQGFDOFXODWHV
H[SHFWHGYDOXHVIRUHYHU\UDQGRPYDULDEOHLQWKHGHFLVLRQWUHH,WLVQRWHZRUWK\WKDWRQO\
KLJKO\ SURPLVLQJ UHVXOWV IURP SKDVH ,,,$ ZDUUDQW FRQWLQXDWLRQ LQ '7$ ,Q VFHQDULR
SODQQLQJ WKUHH DOWHUQDWLYH VFHQDULRV DUH IRUPHG UHIOHFWLQJ WKH PRVW SURILWDEOH DYHUDJH
DQGWKHOHDVWSURILWDEOHIXWXUHVWDWHV
,QIOXHQFHGLDJUDPVZRXOGSURYLGHWKHVDPHUHVXOWVDVWKHGHFLVLRQWUHHDQDO\VLVVLQFHWKH
UROOEDFN FDOFXODWLRQ LV LGHQWLFDO LQ WKDW DSSURDFK $ VLPXODWLRQ HJ 0RQWH &DUOR
VLPXODWLRQ ZRXOG DVVXPH FRQWLQXRXV GLVWULEXWLRQV LQVWHDG RI WZR DQG WKUHHSRLQW
HVWLPDWHV IRU WKH UDQGRP YDULDEOHV JHQHUDWLQJ D GLVWULEXWLRQ RI WKH RXWFRPHV $Q
DSSOLFDWLRQRIXWLOLW\WKHRUHWLFRUVFRULQJPHWKRGVZRXOGZHLJKWKHPRQHWDU\RXWFRPHV
DFFRUGLQJWRWKHGHFLVLRQPDNHUV·SUHIHUHQFHV
7RJHWKHUZLWKGHFLVLRQWUHHDQDO\VLVUHDORSWLRQDSSURDFKLVWKHRQO\PHWKRGLQWKLVFDVH
LQGLFDWLQJ WKDW WKH LQYHVWPHQW RSSRUWXQLW\ LV ZRUWK DFFHSWLQJ :KDW GLIIHUHQWLDWHV UHDO
RSWLRQ DQDO\VLV IURP GHFLVLRQ WUHH DQDO\VLV LV LWV IRFXV RQ WKH PRVW SURILWDEOH IXWXUH
RXWFRPHV RQO\ LQVWHDG RI DOO SRWHQWLDO RXWFRPHV 'HFLVLRQ WUHH DQDO\VLV EHFRPHV PRUH
ODERULRXV WR SHUIRUP ZKHQ WKH QXPEHU RI XQFHUWDLQWLHV LQFOXGHG LQ PRGHOLQJ LQFUHDVH
5HDO RSWLRQ DQDO\VLV GLUHFWO\ LQFOXGHV WKH PDQDJHULDO GLVFUHWLRQ DYDLODEOH EHIRUH SKDVH
,,,%LQWKHFDOFXODWLRQV7KHGHFLVLRQWRFRQWLQXHLVPDGHRQO\LIWKHUHVXOWVIURPSKDVH
,,,$ VWXGLHV DUH KLJKO\ SURPLVLQJ ZKLFK KDSSHQV ZLWK WKH SUREDELOLW\ RI %\
FRQFHQWUDWLQJRQWKHPRVWSUIRWDEOHRXWFRPHIURPSKDVH,,,$UHDORSWLRQORJLFWLSVWKH
EDODQFHWRZDUGVFRPPLWWLQJWRWKHILUVWVWDJHLQYHVWPHQW
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²3KDUPDFHXWLFDO5 '
&ULWLTXHRIWKH7UDGLWLRQDO9DOXDWLRQ0HWKRGV
3HUKDSV WKH ELJJHVW VRXUFH RI HUURU LQ DSSO\LQJ WKH WUDGLWLRQDO WRROV LQWR SURMHFW
HYDOXDWLRQ LV WKH DVVXPSWLRQ WKDW ULVN XQFRQGLWLRQDOO\ UHGXFHV YDOXH $V ZDV
GHPRQVWUDWHGLQWKHH[DPSOHRIWKHSUHYLRXVFKDSWHUWKHKLJKHUWKHYRODWLOLW\WKHODUJHU
WKH XSVLGH SRWHQWLDO DQG WKH KLJKHU WKH SRVVLEOH UHWXUQV LI WKH FDSLWDO RXWOD\V FDQ EH
VWDJHG (DUO\VWDJH LQYHVWPHQWV LQ 5 ' DUH FRQVLGHUHG KLJKO\ ULVN\ WUDGLWLRQDOO\ 7KH
WRROVSUHVHQWHGVRIDUVXSSRUWWKLVFRQWHQWLRXVDUJXPHQWDQGPLVVWKHYDOXHRIPXOWLSOH
RSSRUWXQLWLHVDQGSRVVLEOHWDUJHWSURGXFWVWKDWDUHSUHVHQWHDUO\RQLQDQ5 'SURMHFW
9RODWLOLW\LVQRWWKHVDPHDVULVN9RODWLOLW\HQWDLOVRSSRUWXQLWLHV 6HH)LJXUH
7KH LQFHQWLYH WR LQYHVW LQFUHDVHV ZKHQ UHVRXUFHV FDQ EH FRPPLWWHG LQFUHPHQWDOO\ ,I
WKHUHLVXQFHUWDLQW\DERXWIXWXUHLQYHVWPHQWFRVWVWKHLQFHQWLYHWRPDNHWKHILUVWFDSLWDO
RXWOD\LVIXUWKHUVWUHQJWKHQHG 7KHIODZVLQWUDGLWLRQDOFDSLWDOEXGJHWLQJVWHPIURPWKH
DVVXPSWLRQ WKDW WKH ZKROH LQYHVWPHQW LV LUUHYHUVLEOH DQG FDQQRW EH VWDJHG :KHQ WKLV
UHDOO\ LV WKH FDVH WKH VWDWLF 139 DSSURDFK JLYHV LGHQWLFDO UHVXOWV ZLWK RSWLRQ SULFLQJ
PHWKRGV 0RUHRYHU WKH EDVLF PHDVXUH RI ULVN LQ WKH WUDGLWLRQDO PHWKRGV LH WKH ULVN
SUHPLXP LQ WKH RSSRUWXQWLW\ FRVW RI FDSLWDO LV GLIILFXOW WR HVWLPDWH REMHFWLYHO\ ZKLFK
LQFUHDVHVWKHHUURU
7UDGLWLRQDOYDOXDWLRQWRROVDUHXVHIXOLQVWDEOHLQYHVWPHQWHQYLURQPHQWV7KH\DUHOLNHO\
WR JLYH HUURQHRXV UHVXOWV ZKHQ PDUNHWV PRYH XQSUHGLFWDEO\ SURGXFW XQFHUWDLQWLHV
UHVROYHJUDGXDOO\DQGPDQDJHUVKDYHWKHSRVVLELOLW\WRDGDSWWKHLUGHFLVLRQVLQUHDOWLPH
,Q VKRUW LPSURYHG DQDO\WLFDO PHWKRGV DUH QHHGHG LQ RUGHU WR SUHGLFW WKH IXWXUH PRUH
DFFXUDWHO\ 2QH VWHS LQ WKH ULJKW GLUHFWLRQ LV WKH LQWURGXFWLRQ RI UHDO RSWLRQV
PHWKRGRORJ\
Certainty
Opportunity
y
er
III
II
ch
I
ov
se
un
as
as
i sc
a
Ph
Ph
La
Ph
D
)LJXUH$QLPSURYHGZD\RIWKLQNLQJULVNLVFRQVLGHUHGDVRSSRUWXQLW\
/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
0DMG 6 3LQG\FN 5 6 7LPH WR EXLOG RSWLRQ YDOXH DQG LQYHVWPHQW GHFLVLRQV -RXUQDO RI
)LQDQFLDO(FRQRPLFV9ROSS
2WW 6 + 7KRPSVRQ + ( 8QFHUWDLQ 2XWOD\V LQ 7LPHWREXLOG 3UREOHPV 0DQDJHULDO DQG
'HFLVLRQ(FRQRPLFV9ROSS
$GDSWHGIURP%RHU)37KH9DOXDWLRQRI7HFKQRORJ\²%XVLQHVVDQG)LQDQFLDO,VVXHVLQ5 '
-RKQ:LOH\ 6RQV,QFSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
,1752'8&7,212)5($/237,216
2SSRUWXQLWLHVDUHRSWLRQV²ULJKWVEXWQRWREOLJDWLRQVWRWDNHDFWLRQLQWKHIXWXUH&DSLWDO
LQYHVWPHQWVWKHQDUHHVVHQWLDOO\RSWLRQV 0RUHVSHFLILFDOO\DUHDORSWLRQLVWKHULJKWWR
FRQGLWLRQ D GHFLVLRQ RQ DGGLWLRQDO LQIRUPDWLRQ DERXW D VRXUFH RI XQFHUWDLQW\ WKDW LV
LPSRUWDQW ,Q SKDUPDFHXWLFDO 5 ' PDQDJHPHQW FDQ DEDQGRQ WKH SURMHFW DIWHU WKH
GHYHORSPHQW SKDVH LI WKH FOLQLFDO VWXGLHV KDYH IDLOHG 2U WKH\ FDQ VSHHG XS WKH
GHYHORSPHQW LI WKH SRWHQWLDO WXUQV RXW WR EH ELJJHU WKDQ RULJLQDOO\ SURMHFWHG ,Q WKH
SUHVHQFHRIVXEVWDQWLDOIXWXUHXQFHUWDLQW\DQGPDQDJHULDOIOH[LELOLW\WKHULJKWVWRPDNHGHFLVLRQVLHUHDO
RSWLRQVKDYHYDOXHDQGRIWHQDOWHUWKHRSWLPDOUXOHWRPDQDJHDQ5 'SURMHFW )XUWKHUPRUHWKH
DQDO\WLFDOPHWKRGRORJ\RIRSWLRQWKHRUHWLFYDOXDWLRQWRROVFDQTXDQWLI\WKLVDGGHGYDOXH
PRUHDFFXUDWHO\WKDQWKHWUDGLWLRQDOPHWKRGV+RZHYHULWLVLPSRUWDQWWRVHSDUDWHUHDO
RSWLRQVLHLQYHVWPHQWRSSRUWXQLWLHVIURPRSWLRQWKHRUHWLFYDOXDWLRQPHWKRGVGHILQHG
LQ VHFWLRQ 6LPSOH UHDO RSWLRQV FDQ EH DFFXUDWHO\ YDOXHG DOVR ZLWK WKH WUDGLWLRQDO
YDOXDWLRQPHWKRGV
2SWLRQ&KDUDFWHULVWLFV
%HFDXVHWKHPDLQFRQFHSWVLQUHDORSWLRQVPHWKRGRORJ\EXLOGXSRQWKHDQDO\VLVRIWKHLU
ILQDQFLDOFRXQWHUSDUWVDEDVLFNQRZOHGJHRIJHQHUDORSWLRQWKHRU\LVKHOSIXO0RUHRYHU
DVWKHGHILQLWLRQDQGYDOXDWLRQRIUHDORSWLRQVLVJHQHUDOO\PXFKPRUHFRPSOLFDWHGWKDQ
WKDW RI ILQDQFLDO RSWLRQV WKH WUDQVLWLRQ WR UHDO DVVHWV LV HDVLHU WR PDNH ZLWK D EDVLF
EDFNJURXQGIURPILQDQFLDODVVHWV7KLVVHFWLRQLQWURGXFHV WKH EDVLF FRQFHSWV RI RSWLRQ
WKHRU\
$Q RSWLRQ LV WKH ULJKW EXW QRW WKH REOLJDWLRQ WR EX\ RU VHOO DQ DVVHW XQGHU VSHFLILHG
WHUPV ,IWKHEX\HUKDVDFTXLUHGDULJKWWREX\DQDVVHWWKHRSWLRQLVUHIHUUHGWRDVDFDOO
RSWLRQ,IWKHRSWLRQFRQVLVWVRIDULJKWWRVHOODQDVVHWLWLVUHIHUUHGWRDVDSXWRSWLRQ7KH
NH\ ZRUGV LQ WKH DERYH GHILQLWLRQ DUH ¶XQGHU VSHFLILHG WHUPV· 7KLV PHDQV WKDW DV WKH
FRQWUDFW LV ZULWWHQ DQG WKH RSWLRQ LV ERXJKW RU VROG YDOXHV IRU WKH IROORZLQJ RSWLRQ
SDUDPHWHUVDUHIL[HG)LUVWWKHH[HUFLVHSULFHRUWKHVWULNHSULFHIRUWKHXQGHUO\LQJDVVHW
LV VHW 7KLV LV WKH SULFH ZLWK ZKLFK WKH KROGHU RI DQ RSWLRQ FDQ XVH KLVKHU ULJKW WR
DFTXLUHWKHDVVHWLHH[HUFLVHWKHRSWLRQ7KHXQGHUO\LQJDVVHWFRXOGEHDVWRFNRUUHVXOWV
IURP SKDVH ,, VWXGLHV RI SKDUPDFHXWLFDO 5 ' SURMHFW 6HFRQG WLPH WR PDWXULW\ RU
H[SLUDWLRQGDWHRIWKHRSWLRQLVIL[HG,QRWKHUZRUGVWKHKROGHURIWKHRSWLRQKDVRQO\D
OLPLWHGWLPHWRXVHKLVKHUULJKWVDQGWRH[HUFLVHWKHRSWLRQ0RUHVSHFLILFDOO\WKHRSWLRQ
LV FDOOHG$PHULFDQLIWKHRSWLRQFDQEH H[HUFLVHG DQ\WLPH EHIRUH WKH H[SLUDWLRQ GDWH RU
(XURSHDQLIWKHRSWLRQWRH[HUFLVHLVDYDLODEOHRQO\RQWKHGD\RIH[SLU\7KHSULFHRIWKH
RSWLRQLWVHOILVUHIHUUHGWRDVRSWLRQSUHPLXP
2SWLRQVDUHDVVHWVWKHPVHOYHVLHWKH\KDYHYDOXH7KH\DUHGHULYDWLYHVVLQFHWKHLUSULFH
GHSHQGVRQWKHSULFHPRYHPHQWVRIDQRWKHUDVVHWLHWKHXQGHUO\LQJDVVHW7KLVLVZK\
RSWLRQVDUHDOVRVRPHWLPHVFDOOHGFRQWLQJHQWFODLPV
'L[LW $ . 3LQG\FN 5 6 7KH 2SWLRQV $SSURDFK WR &DSLWDO ,QYHVWPHQW +DUYDUG %XVLQHVV
5HYLHZ0D\-XQHSS
-RKQVRQ%ODNH7HDFKQLQJ1RWH3URMHFW0DQDJHPHQW2SWLRQV6WDQIRUG8QLYHUVLW\SS
'HWHUPLQDQWVRI2SWLRQ9DOXH
2ZLQJ WR WKHLU GHULYDWLYH QDWXUH WKH YDOXDWLRQ RI RSWLRQV LV UHODWLYHO\ FRPSOH[
&RQWLQXRXV FKDQJHV LQ WKH YDOXH RI WKH XQGHUO\LQJ DVVHW DIIHFW WKH ULVNLQHVV RI RSWLRQ
UHWXUQV DFFRUGLQJO\ SUHFOXGLQJ WKH XVH RI GLVFRXQWHG FDVKIORZ EDVHG PHWKRGV 7KLV
VHFWLRQSUHVHQWVWKHEXLOGLQJEORFNVRIRSWLRQYDOXHDWDFRQFHSWXDOOHYHODQGWKHIRUPDO
PDWKHPDWLFDOGHILQLWLRQVDUHLQWURGXFHGLQVHFWLRQ7KHGHWHUPLQDQWVRIRSWLRQYDOXH
DUHVXPPDUL]HGLQ7DEOHZLWKH[SODQDWLRQVJLYHQEHORZ
7DEOH7KHGHWHUPLQDQWVRIRSWLRQYDOXHDQGWKHLPSDFWRIFKDQJHVRQWKHYDOXHRIDFDOORSWLRQWR
EX\DQGDSXWRSWLRQWRVHOOFHWHULVSDULEXV
7KHILUVWGULYHURIRSWLRQYDOXHLVWKHSUHYDLOLQJYDOXHRIWKHXQGHUO\LQJDVVHW7KHLQWULQVLF
YDOXHRIDFDOORSWLRQLVGHILQHGDVWKHGLIIHUHQFHEHWZHHQDVVHWSULFHDQGH[HUFLVHSULFH
7KHUHIRUHWKHH[HUFLVHSULFHLQWKHRSWLRQFRQWUDFWDIIHFWVRSWLRQYDOXH7KHODUJHUWKH
GLIIHUHQFHEHWZHHQWKHWZRSULFHVWKHKLJKHUWKHSURILWPDUJLQ+RZHYHUGRZQVLGHULVN
LVOLPLWHGVLQFHWKHH[HUFLVHRIWKHRSWLRQLVFRQWLQJHQWRQWKHKROGHU·VZLOO,IWKHDVVHW
SULFHLVOHVVWKDQWKHH[HUFLVHSULFHRQWKHGD\RIH[SLU\LWLVRSWLPDOQRWWRH[HUFLVHDFDOO
RSWLRQ,QWKLVFDVHWKHORVVLVOLPLWHGWRWKHVL]HRIRSWLRQSUHPLXP
7KHVHFRQGGHWHUPLQDQWRIYDOXHLVWKHYRODWLOLW\LQWKHSULFHRIWKHXQGHUO\LQJDVVHW,Q
WKHFDVHRIDILQDQFLDODVVHWLWFRXOGEHWKHDQQXDOYRODWLOLW\RIDVWRFNRULQWKHFDVHRID
UHDO DVVHW LW FRXOG EH WKH YDULDELOLW\ LQ WKH SUHVHQW YDOXH RI HVWLPDWHG UHWXUQV IURP D
SURGXFW XQGHU GHYHORSPHQW 7KH LPSDFW RQ RSWLRQ YDOXH GXH WR LQFUHDVHG YRODWLOLW\ LQ
XQGHUO\LQJDVVHWYDOXHLVXQGHUOLQHGKHUH,QFUHDVHGYRODWLOLW\EULQJVDGGHGYDOXHWRDQ\
W\SH RI RSWLRQ VLQFH WKH XSVLGH SRWHQWLDO LV HQKDQFHG EXW WKH GRZQVLGH ULVN UHPDLQV
XQDIIHFWHG
7KHWKLUGVRXUFHRIRSWLRQYDOXHLVWKHOHQJWKRIWKHWLPHWRPDWXULW\,WDIIHFWVWKHYDOXH
RI DQ RSWLRQLQ WZR ZD\V )RU D FDOO RSWLRQ D ORQJHU WLPH WR PDWXULW\ LQFUHDVHV RSWLRQ
YDOXH EHFDXVH WKH WLPHYDOXH RI H[FHUFLVH SULFH LV VPDOOHU DQG WKH RSWLRQ KDV D ODUJHU
SUREDELOLW\RIHQGLQJLQWKHPRQH\)RUDSXWRSWLRQWKHLPSDFWLVDPELJXRXV$ORQJHU
WLPH WR PDWXULW\ KDV D QHJDWLYH HIIHFW RQ WKH SUHVHQW YDOXH RI WKH H[HUFLVH SULFH EXW D
SRVLWLYHHIIHFWRQWKHSUREDELOLW\RILQWULQVLFYDOXHEHLQJDERYH]HUR
$QRSWLRQLVVDLGWREHLQWKHPRQH\DWWKHPRQH\RURXWRIWKHPRQH\ZKHQLWVLQWULQVLFYDOXHLVSRVLWLYH]HUR
RUQHJDWLYHUHVSHFWLYHO\
.XODWLODND13HURWWL(3URMHFW9DOXDWLRQ8QGHU8QFHUWDLQW\:KHQ'RHV'&))DLO"-RXUQDORI
$SSOLHG&RUSRUDWH)LQDQFH:LQWHUSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
)RXUWKDQLQFUHDVHLQWKHLQWHUHVWUDWHZLOODIIHFWFDOORSWLRQYDOXHSRVLWLYHO\EHFDXVHWKH
PRQH\ UHVHUYHG IRU RSWLRQ H[HUFLVH HDUQV D KLJKHU UHWXUQ LI LQYHVWHG LQ WKH PHDQWLPH
$FFRUGLQJO\DQLQFUHDVHLQLQWHUHVWUDWHKDVDQDGYHUVHHIIHFWRQSXWRSWLRQYDOXH
$QG ILQDOO\ WKH GLYLGHQGV SDLG WR KROGHUV RI WKH XQGHUO\LQJ DVVHW DIIHFW WKH YDOXH RI
RSWLRQV VLQFH WKHVH UHWXUQV FKDQJH WKH YDOXH RI WKH XQGHUO\LQJ DVVHW 7KLV GLYLGHQG
LQFRPHUHGXFHVWKHSUHVHQWYDOXHRIWKHXQGHUO\LQJDVVHWE\´OHDNLQJDZD\ µIURPFDOO
RSWLRQKROGHUV7KHUHE\WKHKROGHURIDFDOORSWLRQVXIIHUVIURPDQLQFUHDVHLQGLYLGHQGV
ZKHUHDVWKHKROGHURIDSXWRSWLRQEHQHILWVIURPLW
7KHYDOXHRIDFDOORSWLRQUHODWLYHWRWKHSUHVHQWYDOXHRIDQXQGHUO\LQJDVVHWLVSUHVHQWHG
LQ)LJXUH1RWHWKDWWKHFRPELQHGLPSDFWRILQWHUHVWUDWHVDVVHWYRODWLOLW\DQGWLPHWR
PDWXULW\ EULQJV DGGLWLRQDO YDOXH GHILQHG DV WLPHYDOXH LQWR RSWLRQV RQ WRS RI WKH
LQWULQVLFYDOXH
&DOORSWLRQYDOXH
,QWULQVLFYDOXH
2SWLRQ9DOXH
2SWLRQYDOXH
6SRWSULFH
)LJXUH9DOXHRIDFDOORSWLRQUHODWLYHWRWKHVSRWSULFHRIXQGHUO\LQJDVVHW
0DSSLQJ9DULDEOHVIURP&DSLWDO0DUNHWVWR5HDO$VVHWV
7KLV VHFWLRQ FRQVLGHUV GHWHUPLQDQWV RI RSWLRQ YDOXH IRU UHDO DVVHWV LQ JHQHUDO DQG LQ
SKDUPDFHXWLFDO 5 ' LQ SDUWLFXODU $Q HVWLPDWLRQ RI WKH GLIIHUHQW SDUDPHWHU YDOXHV LV
SUHVHQWHGLQVHFWLRQ
7KH LGHQWLILFDWLRQ RI RSWLRQ SDUDPHWHUV LV PRUH VXEWOH ZLWK UHDO WKDQ ZLWK ILQDQFLDO
RSWLRQVWKHFKDUDFWHULVWLFVDUHKDUGHUWRGHWHUPLQHDQGWKHUHH[LVWVHYHUDOPHWKRGVIRU
HVWLPDWLQJ WKH GLIIHUHQW FRPSRQHQWV RI YDOXH $Q H[DPSOH RI D UHDO LQYHVWPHQW
RSSRUWXQLW\FRQVLGHUHGDVDUHDORSWLRQLVSUHVHQWHGLQ)LJXUH
$PUDP0.XODWLODND15HDO2SWLRQV²0DQDJLQJ6WUDWHJLF,QYHVWPHQWLQDQ8QFHUWDLQ:RUOG
+DUYDUG%XVLQHVV6FKROO3UHVV%RVWRQ0DVVDFKXVHWWVSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
5HDO,QYHVWPHQW2SSRUWXQLW\ &DOO2SWLRQ
3UHVHQWYDOXHRIDSURMHFW·V
6WRFNSULFH
RSHUDWLQJDVVHWVWREHDFTXLUHG
([SHQGLWXUHUHTXLUHGWR
([HUFLVHSULFH
DFTXLUHWKHSURMHFWDVVHWV
/HQJWKRIWLPHWKHGHFLVLRQ
7LPHWRH[SLUDWLRQ
PD\EHGHIHUUHG
7LPHYDOXHRIPRQH\ 5LVNIUHHUDWHRIUHWXUQ
9DULDQFHRIUHWXUQVRQVWRFN
5LVNLQHVVRIWKHSURMHFWDVVHWV
)LJXUH0DSSLQJDQLQYHVWPHQWRSSRUWXQLW\RQWRDFDOORSWLRQ
$VZLWKILQDQFLDORSWLRQVWKHPDLQVRXUFHRIYDOXHIRUUHDORSWLRQVLVWKHSUHVHQWYDOXH
RIWKHXQGHUO\LQJDVVHW&RQWUDU\WRWKHILQDQFLDOZRUOGUHDODVVHWVDUHQRWDOZD\VPDUNHW
SULFHGVRWKHLUSUHVHQWYDOXHKDVWREHGHWHUPLQHGXVLQJWUDGLWLRQDOWRROVVXFKDV139
,Q SKDUPDFHXWLFDO 5 ' IRU H[DPSOH WKH SUHVHQW YDOXH RI WKH SURMHFW DW DQ\
GHYHORSPHQW SKDVH VKRXOG EH FDOFXODWHG E\ GLVFRXQWLQJ WKH HVWLPDWHG SURILWV WR WKH
FXUUHQW SHULRG (VVHQWLDOO\ WKLV PHDQV WKDW XVLQJ UHDO RSWLRQV DSSURDFK LV D
FRPSOHPHQWDU\ YDOXDWLRQ PHWKRG WKDW WDNHV PDQ\ RI WKH VDPH LQSXWV DV WUDGLWLRQDO
YDOXDWLRQWRROVGR
7KH FRXQWHUSDUWRIH[HUFLVHSULFH LV WKH SUHVHQW YDOXH RI WRWDO FRVWV WKDW DUH QHHGHG WR
DFTXLUHWKHXQGHUO\LQJUHDODVVHWV7KXVWKHVWULNHSULFHRIDUHDORSWLRQLVSUHVHQWHGE\
VXQNFRVWVWKDWDUHLQFXUUHGE\FRPPLWWLQJWRDUHDOLQYHVWPHQW,QSKDUPDFHXWLFDO5 '
WKH H[HUFLVH SULFH RI D UHDO RSWLRQ WR SURFHHG LQ FOLQLFDO WULDOV ZRXOG EH WKH FRVWV RI
SHUIRUPLQJ WKRVH WULDOV 5HDO RSWLRQ YDOXH FDQ EH LQFUHDVHG E\ ORZHULQJ SHULRGLF VXQN
FRVWV LH E\ FRPPLWWLQJ WR LQYHVWPHQWV DV LQFUHPHQWDOO\ DV SRVVLEOH )URP DQRWKHU
YLHZSRLQWLQFUHPHQWDOLQYHVWPHQWSROLF\FDQEHFRQVLGHUHGDVLQFUHDVLQJWKHQXPEHURI
YDOXDEOHDEDQGRQPHQWRSWLRQVLQDQ5 'SURMHFW
7KHWLPHYDOXHRIDUHDORSWLRQFDQEHXQGHUVWRRGDVWKHRSSRUWXQLW\FRVWRIFRPPLWWLQJ
WRDQLQYHVWPHQWLPPHGLDWHO\DQGQRWZDLWLQJIRUXQFHUWDLQWLHVWRXQIROG7KHYDOXHRI
ZDLWLQJ WR LQYHVW LV UHODWLYHO\ ORZ LQ 5 ' UHODWHG UHDO RSWLRQV VLQFH WHFKQLFDO
XQFHUWDLQWLHVDUHUHVROYHGRQO\LIWKHSURMHFWLVFRQWLQXHG+RZHYHUDFNQRZOHGJLQJWKH
WLPHYDOXHRIDQ\UHDORSWLRQLVLPSRUWDQWEHFDXVHWKHLGHDRIDGMXVWLQJWKHRSHUDWLRQV
G\QDPLFDOO\DFFRUGLQJWRQHZLQIRUPDWLRQOLHVDWWKHKHDUWRIUHDORSWLRQVDQDO\VLV
$GDSWHGIURP/XHKUPDQ7$ ,QYHVWPHQW2SSRUWXQLWLHVDV5HDO2SWLRQV*HWWLQJ6WDUWHGRQ
WKH1XPEHUV+DUYDUG%XVLQHVV5HYLHZ-XO\$XJXVWSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
7KHULVNIUHHUDWHRILQWHUHVWUHPDLQVWKHVDPHLUUHVSHFWLYHRIWKHILHOGRIDSSOLFDWLRQ
7KHILQDO DQGSUREDEO\WKHPRVWFRPSOH[YDULDEOHWRHVWLPDWHIRUWKHYDOXDWLRQRIUHDO
RSWLRQV LV WKH YRODWLOLW\ LQ WKH YDOXH RI WKH XQGHUO\LQJ DVVHW $V VXJJHVWHG DERYH WKH
SUHVHQW YDOXH RI WKH XQGHUO\LQJ DVVHW LV RIWHQ GLIILFXOW WR GHWHUPLQH EHFDXVH RI
QRQWUDGDELOLW\OHWDORQHWKHYRODWLOLW\LQLWVYDOXH7KHNH\DVVXPSWLRQVLQDVVHVVLQJWKH
PDJQLWXGH RI YRODWLOLW\ LV ZKLFK VRXUFHV RI XQFHUWDLQW\ WR LQFOXGH LQ WKH DQDO\VLV )RU
H[DPSOHLQSKDUPDFHXWLFDO5 'GLIIHUHQWVRXUFHVRIXQFHUWDLQW\DERXQGVHH)LJXUH
0RUHRYHUWKHVWUXFWXUHRIWKHVHOHFWHGXQFHUWDLQWLHVKDVWREHGHILQHGZKHQHYDOXDWLQJ
WKHUHDORSWLRQVDQDO\WLFDOO\
7KHGHWHUPLQDQWVRIUHDORSWLRQYDOXHLQWKHFRQWH[WRIZKHWKHUWRHQWHUWKHSKDVH,,,
VWXGLHVRIDSKDUPDFHXWLFDO5 'SURMHFWDUHYLVXDOL]HGLQ)LJXUHEHORZ
2SWLRQWRLQYHVWLQSKDVH,,, 5HDO,QYHVWPHQW
FOLQLFDOVWXGLHV 2SSRUWXQLW\
3UHVHQWYDOXHRIWKHRSWLRQWRSURFHHG 3UHVHQWYDOXHRIDSURMHFW·V
WRWKHQH[WSKDVHLHPDUNHWODXQFK RSHUDWLQJDVVHWVWREHDFTXLUHG
([SHQGLWXUHUHTXLUHGWR ([SHQGLWXUHUHTXLUHGWR
FRQGXFWSKDVH,,,VWXGLHV DFTXLUHWKHSURMHFWDVVHWV
/HQJWKRIWLPHWKHGHFLVLRQWRVWDUW /HQJWKRIWLPHWKHGHFLVLRQ
SKDVH,,,VWXGLHVPD\EHGHIHUUHG PD\EHGHIHUUHG
7LPHYDOXHRIPRQH\ 7LPHYDOXHRIPRQH\
5LVNLQHVVDQGYRODWLOLW\RIWKHVDOHV
5LVNLQHVVRIWKHSURMHFWDVVHWV
LQWKHWDUJHWHGWKHUDSHXWLFDUHD
)LJXUH 0DSSLQJ WKH FKDUDFWHULVWLFV RI WKH UHDO RSWLRQ WR HQWHU SKDVH ,,, VWXGLHV RQWR JHQHUDO UHDO
RSWLRQFKDUDFWHULVWLFV
7KH7D[RQRP\RI5HDO2SWLRQV
7KLVFKDSWHULQFOXGHVDJHQHUDOFODVVLILFDWLRQRIGLIIHUHQWUHDORSWLRQV7KHLPSRUWDQFHRI
HDFKRSWLRQW\SHLQWKHFRQWH[WRISKDUPDFHXWLFDO5 'LVGLVFXVVHG7KHFKDUDFWHULVWLFV
RI UHOHYDQW UHDO RSWLRQV DUH XQGHUOLQHG LQ RUGHU WR VKRZ VSHFLILFDOO\ ZK\ WKH\ EULQJ
DGGLWLRQDOYDOXHLQWRDQ5 'SURMHFW7KHPRVWYDOXDEOHUHDORSWLRQVLGHQWLILHGLQWKLV
VHFWLRQZLOOEHVWXGLHGPRUHDQDO\WLFDOO\LQWKHFDVHVWXG\RI&KDSWHU
)OH[LELOLW\2SWLRQV
7KLVLQFDVHRIDQRQGLYLGHQGSD\LQJUHDORSWLRQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
$QHVWDEOLVKHGZD\WRFODVVLI\UHDORSWLRQVLVWRGLYLGHWKHPLQWRIOH[LELOLW\DQGJURZWK
RSWLRQV )OH[LELOLW\ RSWLRQV DUH WKH RSSRUWXQLWLHV DYDLODEOH IRU PDQDJHPHQW WR DOWHU WKH
FRXUVHRIDQH[LVWLQJDQGRQJRLQJSURMHFW
Option to Wait
7KHPRVWFRPPRQUHDORSWLRQHPEHGGHGLQDQLQYHVWPHQWRSSRUWXQLW\LVWKHIOH[LELOLW\
LQWKHWLPLQJRILQYHVWPHQW $OPRVWDOOLQYHVWPHQWVFDQEHGHIHUUHGIRUVRPHWLPHLQ
H[SHFWDWLRQ RI QHZ LQIRUPDWLRQ 7KH YDOXH RI WKH RSWLRQ WR ZDLW LV FUHDWHG E\ WKH
YRODWLOLW\ LQ HFRQRPLF XQFHUWDLQW\ ZKLFK FDQ EH H[SORLWHG ZLWK RSWLPDO WLPLQJ RI WKH
LQYHVWPHQW,QIDFWWKHUHDOZD\VH[LVWVDQRSSRUWXQLW\FRVWLQLQYHVWLQJDVWKHRSWLRQWR
ZDLWIRUEHWWHUFLUFXPVWDQFHVLVORVW
,QSKDUPDFHXWLFDO5 'WKHYDOXHRIZDLWLQJLVPRVWRIWHQQHJOLJLEOHWKRXJK7KHPDLQ
VRXUFHRIWRWDOXQFHUWDLQW\LVWKHWHFKQLFDOXQFHUWDLQW\LQSURGXFWGHYHORSPHQWDQGLWLV
UHVROYHGRQO\E\FRQWLQXLQJGHYHORSPHQWWRWKHIROORZLQJVWDJH:DLWLQJGRHVQRWEULQJ
DQ\ QHZ LQIRUPDWLRQ LQWR SURGXFW GHYHORSPHQW $V WKH WLPH RI PDUNHW ODXQFK
DSSURDFKHV WHFKQLFDO XQFHUWDLQW\ GHFUHDVHV ZKLFK LQFUHDVHV WKH UHODWLYH LPSRUWDQFH RI
HFRQRPLFXQFHUWDLQW\7KHYDOXHRIZDLWLQJLVIXUWKHUXQGHUPLQHGE\WKHOLPLWHGWLPHRI
SURGXFW SDWHQWV 2QFH WKH FRPSDQ\ KDV DQ DSSURYHG GUXJ LQ LWV KDQGV LW VKRXOG VWDUW
WDNLQJDGYDQWDJHRILWVSDWHQWFRYHUDVUDSLGO\DVSRVVLEOH:DLWLQJPLJKWEULQJDGGLWLRQDO
LQIRUPDWLRQRQFRPSHWLWLQJSURGXFWVRUUHJXODWRU\DIIDLUVEXWLWDOVRVKRUWHQVWKHWLPH
RISDWHQWSURWHFWLRQ
Staging Options
)HZ LQYHVWPHQWV DUH OXPSVXP DQG KDYH WR EH FRPPLWWHG WR LPPHGLDWHO\ 0RVW WDNH
FRQVLGHUDEOHWLPHWREXLOGDQGKDYHDOLPLWHGUDWHRILQYHVWPHQWZLWKZKLFKWRSURFHHG
7KHUHIRUH WKH PDMRULW\ RI LQYHVWPHQW RSSRUWXQLWLHV DUH LQFUHPHQWDO DQG LQYROYH
RSSRUWXQLWLHVWRGHOD\WRFRQWUDFWRUWRLQFUHDVHWKHOHYHORILQYHVWPHQWVDWVRPHVWDJH
RIWKHSURMHFW 7KHVWUXFWXUHRIWKHFXPXODWLYHLQYHVWPHQWVWUHDPLVKLJKO\LQFUHPHQWDO
LQSKDUPDFHXWLFDO5 'JHQHUDWLQJUHDORSWLRQVWRGHOD\FRQWUDFWRULQFUHDVHLQYHVWPHQW
DWGLIIHUHQWVWDJHVRIDSURMHFW(VSHFLDOO\WKHYDOXHRIWKHRSWLRQWRLQFUHDVHWKHUDWHRI
LQYHVWPHQWPD\EHFRQVLGHUDEOHVLQFHWKHOHQJWKRIWKH5 'OLIHF\FOHFDQEHVKRUWHQHG
E\ LQFUHDVLQJ WKH UDWH RI LQYHVWPHQW +RZHYHU LQ RUGHU WR YDOXH WKHVH UHDO RSWLRQV
VSHFLILFDVXPSWLRQVZRXOGKDYHWREHPDGHZKLFKPDNHVWKHYDOXDWLRQOHVVWUDQVSDUHQW
Option to Abandon
$QRWKHUFRQVHTXHQFHRIDQLQFUHPHQWDOLQYHVWPHQWSROLF\LVWKHRSWLRQWRDEDQGRQWKH
SURMHFW LI WKH UHVXOWV IURP WKH ODWHVW GHYHORSPHQW SKDVH GR QRW ZDUUDQW FRQWLQXDWLRQ
7KLVRSWLRQLVYDOXDEOHLQSKDUPDFHXWLFDO5 'DQGLWLVRIWHQH[HUFLVHGDVLVVKRZQE\
WKH ORZ FXPXODWLYH VXFFHVV UDWH RI ILQDO SURGXFWV 7KH LPSDFW RI WKLV RSWLRQ LV WKH
UHGXFWLRQRIWKHWRWDOULVNGXULQJDOO VWDJHV RI 5 ' DFWLYLWLHV 7KH PRUH DEDQGRQPHQW
RSWLRQVWKHUHDUHWKHORZHUWKHRYHUDOOULVNLQHVVRIDQ\LQFUHPHQWDOLQYHVWPHQWEHFRPHV
.XODWLODND10DUFXV$-3URMHFW9DOXDWLRQ8QGHU8QFHUWDLQW\:KHQ'RHV'&))DLO"-RXUQDO
RI$SSOLHG&RUSRUDWH)LQDQFH:LQWHUSS
0DMG 6 3LQG\FN 5 6 7LPH WR EXLOG RSWLRQ YDOXH DQG LQYHVWPHQW GHFLVLRQV -RXUQDO RI
)LQDQFLDO(FRQRPLFV9ROSS
7ULJHRUJLV / 5HDO 2SWLRQV DQG ,QWHUDFWLRQV ZLWK )LQDQFLDO )OH[LELOLW\ )LQDQFLDO 0DQDJHPHQW
$XWXPQSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
,W LV WKLV UHGXFHG OHYHO RI ULVN WKDW UHDO RSWLRQ DQDO\VLV LQFOXGHV LQ YDOXDWLRQ LQ D PRUH
VLPSOH PDQQHU WKDQ IRU H[DPSOH GHFLVLRQ WUHH DQDO\VLV +RZHYHU WKH WKUHVKROG WR
H[HUFLVH WKH DEDQGRQPHQW RSWLRQ LQ SKDUPDFHXWLFDO 5 ' LV KLJK GXH WR ODUJH VXQN
FRVWV
*URZWK2SWLRQV
*URZWKRSWLRQVUHIHUWRWKHXQDQWLFLSDWHGLQYHVWPHQWRSSRUWXQLWLHVDYDLODEOHWRGHFLVLRQ
PDNHUVWKDWZHUHPDGHSRVVLEOHE\SUHFHGLQJLQYHVWPHQWV7KHHDUO\LQYHVWPHQWVZKLFK
HQDEOH WKH PRUH SURILWDEOH IROORZRQ LQYHVWPHQWV DUH RIWHQ UHIHUUHG WR DV SODWIRUP
LQYHVWPHQWV VLQFHWKH\SURYLGHDSODWIRUPIRUIXUWKHUJURZWK,WLVLPSRUWDQWWRLQFOXGH
WKHYDOXHRIWKHVHJURZWKRSWLRQVDOUHDG\LQWKHFDOFXODWLRQVRQWKHSURILWDELOLW\RIWKH
ILUVWVWDJH LQYHVWPHQWV ,I WKH YDOXH RI JURZWK RSSRUWXQLWLHV LV H[FOXGHG P\RSLF
LQYHVWPHQWGHFLVLRQVDQGXQGHULQYHVWLQJDUHOLNHO\WRUHVXOW
*URZWK RSWLRQV IRUP D VXEVWDQWLDO SDUW RI WKH YDOXH RI HDUO\VWDJH LQYHVWPHQWV LQ
SKDUPDFHXWLFDO5 '7KHLULPSRUWDQFHLQWKLVFRQWH[WLVFRQVLGHUDEOHVLQFHWKHYDOXHRI
DOOSUHFOLQLFDODQGFOLQLFDOVWXGLHVLVHVVHQWLDOO\WKHYDOXHRIIXUWKHUJURZWKDQGLQYHVWPHQW
RSSRUWXQLWLHV7KHILUVWSRVLWLYHFDVKIORZVVWDUWIORZLQJRQO\DIWHUPDUNHWODXQFK3KDVH
,,, RU SKDVH ,9 VWXGLHV ZLOO QHYHU EH SHUIRUPHG ZLWKRXW VXFFHVVIXO UHVXOWV IURP
SUHFOLQLFDODQGSKDVH, ,,VWXGLHV0RUHRYHUVHYHUDOPRUHYDOXDEOHJURZWKRSWLRQVOLH
LQWKHSRVVLEOHOLQHH[WHQVLRQVRIPDUNHWUHDG\GUXJV7KHYDOXHRIWKHVHOLQHH[WHQVLRQV
FDQ EH DSSUR[LPDWHG ZLWK RSWLRQWKHRUHWLF PHWKRGV DOUHDG\ VHYHUDO \HDUV EHIRUH WKH
´SDUHQWµSURGXFWLVODXQFKHG
,QKHUHQWDQG3URDFWLYH2SWLRQV
$QRWKHU YLHZSRLQW RQ UHDO RSWLRQ FODVVLILFDWLRQ LV WR VHSDUDWH RSWLRQV WKDW DUH
DXWRPDWLFDOO\HPEHGGHGLQWKHSURMHFWIURPWKRVHWKDWPXVWEHLQWHQWLRQDOO\FUHDWHGLQ
WKHFRXUVHRIWKHSURMHFW)RULQVWDQFHRQFHDSURMHFWLVVWDUWHGWKHRSWLRQWRDEDQGRQLV
DOZD\VSUHVHQW3URDFWLYHRSWLRQVKRZHYHUDUHQRWLQKHUHQWLQWKHSURMHFWEXWPXVWEH
GHVLJQHGDQGSODQQHG7KH\DGGYDOXHWRSKDUPDFHXWLFDO5 'E\LQFUHDVLQJIOH[LELOLW\LQ
WKHGHVLJQRIWKHILQDOSURGXFWDQGWKHUHE\EURDGHQLQJWKHWDUJHWPDUNHW)RUH[DPSOHLI
WKHSDWLHQWFDQWDNHWKHGUXJLQDOWHUQDWLYHIRUPVRUZLWKGLIIHUHQWGRVLQJLQWHUYDOVWKH
QXPEHU RI SRWHQWLDO FXVWRPHUV LQFUHDVHV $OWKRXJK WKH LPSRUWDQFH RI WKHVH SURDFWLYH
SURGXFWRSHUDWLQJRSWLRQVRURSWLRQVWRVZLWFKLVGLIILFXOWWRTXDQWLI\YDOXHFDQEHFUHDWHGYLD
IDUVLJKWHGSURGXFWGHYHORSPHQW
7KHPRVWJHQHUDOFODVVRISURDFWLYHRSWLRQVDUHLQYHVWPHQWVLQRUJDQLVDWRULDOOHDUQLQJWR
EXLOGEURDGH[SHUWLVH'HYHORSLQJRUJDQLVDWRULDOFDSDELOLWLHVFUHDWHVDFRPPRQSODWIRUP
WRUHVSRQGPRUHHIILFLHQWO\WRDQ\NLQGRIIXWXUHHYHQWVDQGXQFHUWDLQWLHV 7KHDELOLW\WR
FUHDWHNQRZOHGJHDFURVVWKHUDSHXWLFDUHDVDQGGLIIHUHQWGUXJVLVOLNHO\WRJHQHUDWHPRUH
SRWHQWLDOWKDQWKHRSSRUWXQLW\DVVRFLDWHGZLWKDQ\RQHWKHUDSHXWLFDUHDRUDGUXJ$VD
UHVXOWWKHKLGGHQNQRZOHGJHRUVKDGRZRSWLRQVLQWKHRUJDQLVDWLRQFDQEHH[SORLWHGDQG
6HH6HFWLRQ3URMHFW+\VWHUHVLVIRUDPRUHGHWDLOHGGLVFXVVLRQRQWKLVSKHQRPHQRQ
.RJXW % .XODWLODND 1 2SWLRQV 7KLQNLQJ DQG 3ODWIRUP ,QYHVWPHQWV &DOLIRUQLD 0DQDJHPHQW
5HYLHZ:LQWHUSS
.RJXW % .XODWLODND 1 2SWLRQV 7KLQNLQJ DQG 3ODWIRUP ,QYHVWPHQWV &DOLIRUQLD 0DQDJHPHQW
5HYLHZ:LQWHUSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
H[HUFLVHG WR FUHDWH DGGLWLRQDO YDOXH 2UJDQLVDWRULDO FDSDELOLWLHV DUH DOO WKH PRUH
LPSRUWDQW EHFDXVH WKH\ DUH GLIILFXOW WR LPLWDWH RU SUHHPSW 2Q WKH RWKHU KDQG
LQYHVWPHQWVLQ¶VRIWLVVXHV·LQWKHRUJDQLVDWRQDUHXVXDOO\PRVWGLIILFXOWWRDUJXHIRUDV
WKHLULPSDFWLVKDUGWRPHDVXUH
,Q FRQOXVLRQ WKH PRVW YDOXDEOH SURMHFWVSHFLILF UHDO RSWLRQV HPEHGGHG LQ D
SKDUPDFHXWLFDO5 'SURMHFWDUHWKHRSWLRQWRDEDQGRQWKHSURMHFWDQGWKHJURZWKRSWLRQVIRU
IXUWKHULQYHVWPHQWV:LWKSURDFWLYHSODQQLQJGHFLVLRQPDNHUVFDQLQFUHDVHWKHYDOXHRID
SURMHFWE\LQFOXGLQJRSHUDWLQJRSWLRQVLQLW
5HDO9HUVXV)LQDQFLDO2SWLRQV
$SDUWIURPGLIIHUHQFHVLQWKHXQGHUO\LQJDVVHWVUHDODQGILQDQFLDORSWLRQVGLIIHULQZD\V
WKDWKDYHDGLUHFWLPSDFWRQWKHLULGHQWLILFDWLRQDQGYDOXDWLRQ
)LUVW UHDO RSWLRQV PD\ EH SURSULHWDU\ RU VKDUHG ZKHUHDV ILQDQFLDO RSWLRQV UDUHO\ KDYH
PRUHWKDQRQHKROGHU([FOXVLYHULJKWVWRDQLQYHVWPHQWRSSRUWXQLW\HQKDQFHLWVYDOXH
VLQFHWKHKROGHUFDQLJQRUHWKHWKUHDWRISRWHQWLDOFRPSHWLWRUVWDNLQJDGYDQWDJHRIWKH
VDPH RSSRUWXQLW\ 7KLV PHDQV WKDW H[FOXVLYLW\ RI RSWLRQV VWUHQJWKHQV WKH WHQGHQF\ WR
SRVWSRQH SURMHFWV VXEMHFW WR WKH VL]H RI ORVW UHYHQXHV ,Q SKDUPDFHXWLFDO 5 ' UHDO
RSWLRQV HPEHGGHG LQ D SURMHFW XVXDOO\ RIIHU DGHTXDWH H[FOXVLYLW\ WKDQNV WR SDWHQWHG
GHYHORSPHQW ULJKWV 2Q WKH RWKHU KDQG DQ H[LVWLQJ WHFKQRORJ\ SODWIRUP RIIHUV D
FRPPRQ UHDO RSWLRQ WR FRQWLQXH GHYHORSPHQW WR DOO WKH VWDNHKROGHUV SRVVHVVLQJ WKH
H[LVWLQJNQRZOHGJH
6HFRQG UHDO RSWLRQV DUH JHQHUDOO\ PRUH YDJXHO\ LGHQWLILHG DQG WKH\ VKRZ
LQWHUGHSHQGHQFLHVZLWKRWKHURSWLRQVDQGFRPSRXQGQHVVDFURVVWLPH$FRPSRXQGRSWLRQ
LVGHILQHGDVDQRSWLRQRQDQRWKHURSWLRQ,QSKDUPDFHXWLFDO5 'LQYHVWPHQWVLQHDUO\
VWDJH FOLQLFDO VWXGLHV PD\ OHDG WR IXUWKHU LQYHVWPHQW RSSRUWXQLWLHV LH RSWLRQV 7KLV
PHDQVWKDWE\H[HUFLVLQJWKHILUVWRSWLRQWKHFRPSDQ\UHFHLYHVDQRWKHURSWLRQWRSURFHHG
WRWKHQH[WGHYHORSPHQWSKDVH&RPSRXQGQHVVRIRSWLRQVPDNHVWKHDQDO\VLVUHODWLYHO\
GLIILFXOWWRIROORZVLQFHWKHTXDQWLWDWLYHDQDO\VLVRIVHTXHQFHVRIRSWLRQVEHFRPHVYHU\
FRPSOH[
7KLUG ZKHUHDV ILQDQFLDO RSWLRQV DUH WUDGHG LQ OLTXLG PDUNHWV UHDO RSWLRQV DUH PRVWO\
QRQWUDGDEOH 7KH SKDUPDFHXWLFDO LQGXVWU\ LV SHUKDSV DQ H[FHSWLRQ VLQFH WKHUH LV D
JURZLQJ PDUNHW IRU LGHQWLILHG PROHFXOHV DQG ULJKWV WR GHYHORS WKHP IXUWKHU ,Q DQ\
FDVH WKH PDUNHWV DUH LPSHUIHFW ZLWK VXEVWDQWLDO FRVWV LQFXUULQJ WR WUDQVDFWLRQ
SDUWLFLSDQWV
)RXUWKRSWLRQYDOXHDQGRSWLPDOWLPHWRH[HUFLVHDUHLQIOXHQFHGE\WKHPDUNHWSRVLWLRQ
RI WKH FRPSDQ\ KROGLQJ WKH RSWLRQ ,I FRPSHWLWLRQ LV LPSHUIHFW LW PD\ EH RSWLPDO WR
H[HUFLVHRSWLRQVDVTXLFNO\DVSRVVLEOHWRSUHHPSWFRPSHWLWLYHUHVSRQVHDQGWRWDNHIXOO
%RZPDQ(++XUU\'6WUDWHJ\7KURXJKWKH2SWLRQ/HQV$Q,QWHJUDWHG9LHZRI5HVRXUFH
,QYHVWPHQWVDQGWKH,QFUHPHQWDO&KRLFH3URFHVV$FDGHP\RI0DQDJHPHQW5HYLHZ9RO1RSS
7ULJHRUJLV / 5HDO 2SWLRQV 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH $OORFDWLRQ 0,7
3UHVVSS
6PLW + 7 - $QNXP / $ $ 5HDO 2SWLRQV DQG *DPH7KHRUHWLF $SSURDFK WR &RUSRUDWH
,QYHVWPHQW6WUDWHJ\XQGHU&RPSHWLWLRQ)LQDQFLDO0DQDJHPHQW$XWXPQSS
7KH(FRQRPLVW$6XUYH\RIWKH3KDUPDFHXWLFDO,QGXVWU\6SHFLDO(GLWLRQ)HEUXDU\
VW
DGYDQWDJH RI IXWXUH JURZWK RSSRUWXQLWLHV :KHQ WKH VWUDWHJLF DGYDQWDJH LV VWURQJ
LQFUHDVHG XQFHUWDLQW\ HQFRXUDJHV LQYHVWPHQW LQ JURZWK RSWLRQV ,Q SUDFWLFH VWUDWHJLF
FRQVLGHUDWLRQV PD\ FDOO IRU DQ HDUO\ LQYHVWPHQW DW WKH VDPH WLPH WKDW ZDLWLQJ ZRXOG
GHFUHDVHWRWDOSURMHFWULVNWKHRSWLPDOFKRLFHWKHQKDVWREDODQFHWKHWZR ,QJHQHUDO
HQGRJHQL]LQJ WKH HIIHFW RI PDUNHW VWUXFWXUH GHHSHQV WKH OHYHO RI DQDO\VLV WR LQFOXGH
JDPHWKHRUHWLFFRQVLGHUDWLRQVEHWZHHQFRPSDQLHVZKRDUHDFWLYHLQWKHWDUJHWPDUNHW
,Q VKRUW UHDO RSWLRQV DUH UDUHO\ DYDLODEOH ¶XQGHU VSHFLILHG WHUPV· ,QVWHDG WKHLU
FKDUDFWHULVWLFVDUHIX]]\DQGGHSHQGRQWKHYLHZSRLQWDQGVWDWXVRIWKHVWDNHKROGHU7KLV
OHDYHVURRPIRUVXEMHFWLYLW\LQWKHYDOXDWLRQRIUHDORSWLRQV)RUH[DPSOHWKHYDOXHRI
WKHULJKWVIRUGHYHORSLQJDGUXJGHSHQGRQWKHEX\HU·VLQWHUQDO5 'FDSDELOLWLHVDQGRQ
KLV H[LVWLQJ SURGXFW SRUWIROLR $OVR VXEMHFWLYH NQRZOHGJH IURP WKH PHPEHUV RI WKH
5 ' SURMHFW WHDP VKRXOG EH H[SORLWHG ZKHQ HVWLPDWLQJ WKH SDUDPHWHU YDOXHV IRU UHDO
RSWLRQ YDOXDWLRQ 7KHUHIRUH VXEMHFWLYLW\ LQ JDWKHULQJ GDWD VKRXOG QRW EH FRQVLGHUHG D
GUDZEDFNEXWLQVWHDGDQLQKHUHQWFKDUDFWHULVWLFLQWKHLGHQWLILFDWLRQDQGYDOXDWLRQRIUHDO
RSWLRQV
$SSOLFDWLRQVRQ5HDO$VVHWV
7KLV VHFWLRQ LQWURGXFHV WKH ORJLF EHKLQG UHDO RSWLRQV LQ GLIIHUHQW FRQWH[WV :H ILUVW
SUHVHQW DQ H[DPSOH IURP SKDUPDFHXWLFDO 5 ' DQG FRQWLQXH ZLWK FDVHV IURP RWKHU
LQGXVWULHVIROORZHGE\QRQHFRQRPLFDSSOLFDWLRQV
DSSURYHGDQGLVUHDG\IRUODXQFKZKHUHDVSURGXFWLVLQWKHPLGGOHRISKDVH,,FOLQLFDO
VWXGLHV 7KH GHFLVLRQ WR HQWHU WKH FRVWO\ SKDVH ,,, VWXGLHV IRU SURGXFW LV GXH LQ WZR
\HDUV· WLPH 0DQDJHPHQW UHDOLVHV WKDW WKH LQIRUPDWLRQ UHYHDOHG E\ WKH PDUNHW
LQWURGXFWLRQ RI SURGXFW ZRXOG KHOS LQ DVVHVVLQJ WKH SRWHQWLDO IRU SURGXFW EXW WKH
YDOXH RI WKLV LQIRUPDWLRQ LV XQFHUWDLQ 0RUHRYHU 139 FDOFXODWLRQV IRU HDFK SURGXFW
VHSDUDWHO\JLYHQHJDWLYHYDOXHVIRUERWKRIWKHP+RZHYHULIZHLQFOXGHWKHUHDORSWLRQ
YDOXHRIPDQDJHULDOIOH[LELOLW\WRFRQGLWLRQLQYHVWPHQWLQSKDVH,,,VWXGLHVRISURGXFW
RQ WKH HYROXWLRQ DQG VXFFHVV RI SURGXFW WKH VLWXDWLRQ LV FKDQJHG 8VLQJ VWRFKDVWLF
G\QDPLF SURJUDPPLQJ WKLV UHDO RSWLRQ YDOXH PD\ EH KLJK HQRXJK WR ZDUUDQW PDUNHW ODXQFK RI
SURGXFW,WVKRXOGEHVWUHVVHGWKDWWKHYDOXHRIWKHRSWLRQLVFUHDWHGE\WKHDELOLW\WRZDLW
DQG H[SORLWXQFHUWDLQW\LHYRODWLOLW\HPEHGGHGLQ WKH PDUNHW VXFFHVV RI SURGXFW ,I
SURGXFW WXUQV RXW WR EH SURILWDEOH WKH GHFLVLRQ WR HQWHU SKDVH ,,, ZLWK SURGXFW LV
PDGH+RZHYHULIWKHUHVXOWVDUHDGYHUVHWKHORVVHVIRUSURGXFWUHPDLQOLPLWHGVLQFH
WKH RSWLRQ WR LQYHVW LQ SKDVH ,,, VWXGLHV LV OHIW XQH[HUFLVHG 7KH NH\ LVVXH KHUH LV WKH
DV\PPHWU\LQUHYHQXHVXSVLGHSRWHQWLDOH[LVWVZKLOHORVVHVDUHNHSWWRDPLQLPXP
.XODWLODND 1 3HURWWL ( 6WUDWHJLF *URZWK 2SWLRQV 0DQDJHPHQW 6FLHQFH 9RO 1R SS
'L[LW$.,QYHVWPHQWDQG+\VWHUHVLV-RXUQDORI(FRQRPLF3HUVSHFWLYHV9RO1R:LQWHU
SS
$GDSWHGIURP0LFDOL]]L$7LPLQJWR,QYHVWDQG9DOXHRI0DQDJHULDO)OH[LELOLW\6FKHULQJ3ORXJK
&DVH6WXG\5HVHDUFK3DSHUSUHVHQWHGWKHUG$QQXDO5HDO2SWLRQV&RQIHUHQFH-XQH7KH1HWKHUODQGV
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
2WKHU,QGXVWULHV
$ JHQHUDO H[DPSOH WKDW LV DSSOLFDEOH WR DQ\ LQGXVWU\ LV WKH HIIHFW RI LQWHUHVW UDWH
XQFHUWDLQW\ RQ RSWLPDO LQYHVWPHQW UXOH ,I WKH PDQDJHPHQW KDV WKH DELOLW\ WR
SRVWSRQH WKH LQYHVWPHQW GHFLVLRQ DQ\ XQFHUWDLQW\ LQ LQWHUHVW UDWH FUHDWHV D YDOXDEOH
RSWLRQ WR GHOD\ WKH VWDUW RI WKH SURMHFW ,QYHVWPHQW GHOD\ LV RSWLPDO LI WKHUH H[LVWV D
SRVVLELOLW\ IRU D IDOO LQ LQWHUHVW UDWHV LQ WKH IXWXUH PDNLQJ WKH ZKROH SURMHFW PRUH
YDOXDEOH,QWKLVVHQVHHYHU\LQYHVWPHQWRSSRUWXQLW\FRPSHWHVZLWKLWVHOIGHOD\HG
)XUWKHUH[DPSOHVFDQEHIRXQGLQLQGXVWULHVLQYROYLQJFRPPRGLWLHVIRUH[DPSOHRLO
JDV ODQG RU RUH &RQWUDU\ WR 5 ' DSSOLFDWLRQV RSWLRQ YDOXDWLRQ LQ WKHVH FDVHV LV
PRUHVWUDLJKWIRUZDUGVLQFHWKHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLVHDV\WRHVWLPDWH
IURP PDUNHW SULFHV 0RUHRYHU WKH YRODWLOLW\ RI WKH FKDQJHV FDQ EH WUDFNHG IURP
KLVWRULFDODVVHWYDOXHV:LWKWKLVLQIRUPDWLRQUHDORSWLRQVDSSURDFK LV DEOH WR YDOXH WKH
ULJKWV LH WKH RSWLRQ IRU D SRRO RI FRPPRGLWLHV VXFK DV WKH ULJKW IRU DQ RLO ILHOG
FRUUHFWO\ 7KH DQDO\VLV SURYLGHV DOVR DQ RSWLPDO LQYHVWPHQW UXOH D WULJJHUSULFH IRU WKH
XQGHUO\LQJDVVHWWKDWMXVWLILHVWKHVWDUWRIRSHUDWLRQV
1RQ(FRQRPLF$SSOLFDWLRQV
0DQ\SHUVRQDODQGVRFLDOFKRLFHVUHVHPEOHLQYHVWPHQWVWKH\DUHFRVWO\WRUHYHUVHWKH\
PXVW EH PDGH LQ DQ XQFHUWDLQ HQYLURQPHQW DQG WKHLU WLPLQJ LV D PDWWHU RI FKRLFH $
SULPHH[DPSOHLVPDUULDJHLWHQWDLOVVXEVWDQWLDOFRVWVRIFRXUWVKLSDQGWKHKDSSLQHVVRU
PLVHU\ZLWKLQWKHPDUULDJHFDQEHRQO\LPSHUIHFWO\IRUHFDVWLQDGYDQFH,QWKHODQJXDJH
RI RSWLRQ WKHRU\ KDSSLQHVV FDQ EH LQWHUSUHWHG DV WKH XQGHUO\LQJ DVVHW ZKRVH YDOXH
FRQWLQXHVWRIOXFWXDWHVWRFKDVWLFDOO\LQWLPH&RXUWVKLSRQWKHRWKHUKDQGFDQEHVHHQ
DVWKHHTXLYDOHQWRIH[SORUDWRU\5 ' $OWKRXJKWKHH[SHFWHGUHWXUQLVQRWYHU\KLJK
ERWKDFWLYLWLHVFUHDWHYDOXDEOHJURZWKRSWLRQV²QDPHO\WKHRSSRUWXQLW\WRIROORZXSRU
QRW WR DFFRUGLQJ WR WKH LQIRUPDWLRQ UHYHDOHG E\ WKH LQLWLDO VWHSV 6LQFH GLYRUFH KDV LWV
RZQPRQHWDU\DQGVRFLDOFRVWVZDLWLQJIRUDEHWWHUSDUWQHUKDVRSWLRQYDOXH7KHUHIRUH
ZHVKRXOGH[SHFWPRUHFDUHIXOSDUWQHUVHDUFKLQJDQGORQJHUPDWLQJSHULRGVRQDYHUDJH
LQFXOWXUHVZKHUHWKHFRVWVRIGLYRUFHDUHODUJHU,QWKHFRQWH[WRIPRGHUQ)LQODQGWKH
LQFUHDVHGQXPEHURIGLYRUFHVLQWKHVFRXOGEHH[SODLQHGE\ORZHUHGWRWDOVRFLDOFRVWV
IURP GLYRUFH )ROORZLQJ HOHPHQWDU\ RSWLRQ WKHRU\ ZKHQ WKH VXQN FRVWV RI DQ
,QJHUVROO-(-U5RVV6$:DLWLQJWR,QYHVW,QYHVWPHQWDQG8QFHUWDLQW\-RXUQDORI%XVLQHVV
SS
5RVV 6 8VHV $EXVHV DQG $OWHUQDWLYHV WR WKH 1HW 3UHVHQW 9DOXH 5XOH )LQDQFLDO 0DQDJHPHQW
9RO1RSS
6SDKU5:6FKZHEDFK5*&RPSDULQJ0HDQ5HYHUWLQJ9HUVXV3XUH'LIIXVLRQ,QWHUHVW5DWH
3URFHVVHV LQ 9DOXLQJ 3RVWSRQHPHQW 2SWLRQV 7KH 4XDUWHUO\ 5HYLHZ RI (FRQRPLFV DQG )LQDQFH9RO
6SHFLDO,VVXH2Q5HDO2SWLRQVSS
3DGGRFN - / 6LHJHO ' 5 6PLWK -/ 9DOXLQJ 2IIVKRUH 2LO 3URSHUWLHV :LWK 2SWLRQ 3ULFLQJ
0RGHOV0LGODQG&RUSRUDWH)LQDQFH-RXUQDO6SULQJSS
.HPQD$*=&DVH6WXGLHVRQ5HDO2SWLRQV)LQDQFLDO0DQDJHPHQWSS
&RUWD]DU * &DVDVVXV - 2SWLPDO 7LPLQJ RI 0LQH ([SDQVLRQ ,PSOHPHQWLQJ D 5HDO 2SWLRQV
0RGHO7KH4XDUWHUO\5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
'L[LW $ . 3LQG\FN 5 6 7KH 2SWLRQV $SSURDFK WR &DSLWDO ,QYHVWPHQW +DUYDUG %XVLQHVV
5HYLHZ0D\-XQHSS
7KLVFRQFOXVLRQLVKLJKO\KHXULVWLFDQGWKHDXWKRUWDNHVIXOOUHVSRQVLELOLW\RILW
LQYHVWPHQWIDOOWKHH[LWWULJJHUEHFRPHVORZHU
,QYHVWPHQW+\VWHUHVLV
$SDUWLFXODUO\LQWHUHVWLQJDSSOLFDWLRQIDPLOLDUIURPQDWXUDOVFLHQFHVLVLQYHVWPHQWK\VWHUHVLV
7KHQDPHRIWKHSKHQRPHQRQFRPHVIURPHOHFWURPDJQHWLVPLIZHWDNHDQLURQEDUZLWK
DZLUHZUDSSHGDURXQGLWSDVVDQHOHFWULFFXUUHQWWKURXJKWKHZLUHWKHLURQZLOOEHFRPH
PDJQHWL]HG+RZHYHULIWKHFXUUHQWLVVZLWFKHGRIIWKHPDJQHWLVPLVQRWFRPSOHWHO\ORVW
7KH FDXVH ZDV WHPSRUDU\ EXW WKH HIIHFW RU VRPH UHVLGXDO RI LW UHPDLQV 7KLV
SKHQRPHQRQ LV FDOOHG K\VWHUHVLV %\ DQDORJ\ WKH IDLOXUH RI LQYHVWPHQW GHFLVLRQV WR
UHYHUVHWKHPVHOYHVZKHQWKHXQGHUO\LQJFDXVHVDUHIXOO\UHYHUVHGFDQEHFDOOHGHFRQRPLF
RULQYHVWPHQWK\VWHUHVLV
3URMHFW+\VWHUHVLV
,Q WKH FRQWH[W RI SKDUPDFHXWLFDO 5 ' HFRQRPLF K\VWHUHVLV KDV DQ LQVLJKWIXO
LQWHUSUHWDWLRQ ,W LV DFNQRZOHGJHG WKDW ZKHQ XQGHU ZD\ SURMHFWV HDVLO\ EHFRPH H[SUHVV
WUDLQV RQFH WKH SURMHFW JHW D KHDG RI VWHDP YHU\ OLWWOH FDQ VWRS LW 3URMHFWV WHQG WR
FUHDWH DQ LQHUWLD RI WKHLU RZQ (VSHFLDOO\ LQ SKDUPDFHXWLFDO 5 ' ZKHUH WKH SURGXFW
GHYHORSPHQWWLPHVDUHYHU\ORQJVXQNFRVWVDUHELJDQGXQFHUWDLQW\DERXQGVVWRSSLQJ
GHFLVLRQV DUH GLIILFXOW $EDQGRQLQJ D PXOWL\HDU 5 ' SURMHFW HQWDLOV FRQIURQWDWLRQV
EHWZHHQRUJDQLVDWRULDOLVVXHVRQRQHKDQGDQGPDUNHWDQGPHGLFDOUHDOLWLHVRQWKHRWKHU
KDQG
+RZHYHUDSSOLHGRSWLRQVWKHRU\VXJJHVWVWKDWWKHUHH[LVWVDQDUHDRIRSWLPDOLQHUWLDIRUD
SURMHFWVRPHWLPHVUHIHUUHGWRDV´DEHQHYROHQWW\UDQQ\RIWKHVWDWXVTXRµ 7KHRSWLPDO
FRUULGRU RI LQHUWLD LV FUHDWHG E\ WKH YDOXH RI WKH RSWLRQ WR SRVWSRQH WKH VWDUW RI WKH
LQYHVWPHQW DQG E\ WKH YDOXH RI WKH RSWLRQ WR SRVWSRQH WKH DEDQGRQPHQW GHFLVLRQ
VRPHZKHUHWRWKHIXWXUH 7KHFRUULGRRURIRSWLPDOLQHUWLDLVLOOXVWUDWHGLQ)LJXUH
'L[LW$.,QYHVWPHQWDQG+\VWHUHVLV-RXUQDORI(FRQRPLF3HUVSHFWLYHV9RO1R:LQWHU
SS
&RRSHU5*6WDJH*DWH6\VWHPV$1HZ7RROIRU0DQDJLQJ1HZ3URGXFWV%XVLQHVV+RUL]RQV
0D\-XQHSS
'L[LW$.,QYHVWPHQWDQG+\VWHUHVLV-RXUQDORI(FRQRPLF3HUVSHFWLYHV9RO1R:LQWHU
SS
$QLPSOLFLWDVVXPSWLRQWKDWWKHUHUHDOO\LVYDOXHLQZDLWLQJLVPDGH7KLVPD\VRPHWLPHVQRWEHWKHFDVH
LQ SKDUPDFHXWLFDO 5 ' GXH WR SDWHQW H[SLU\ 0RUHRYHU QR WHPSRUDU\ VKXWGRZQ LV DVVXPHG WR EH
SRVVLEOH
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
(67,0$7('9$/8(2)352-(&7
9DOXHRIRSWLRQWR
SRVWSRQHLQYHVWPHQW
1HW3UHVHQW9DOXH
9DOXHRIRSWLRQWR
SRVWSRQHDEDQGRQPHQW
7,0(
DVVXPLQJXQGHUO\LQJDVVHWYRODWLOLW\UHPDLQVFRQVWDQW
)LJXUH 7ZR UHDO RSWLRQV WKDW DIIHFW SURMHFW YDOXH JHQHUDWH K\VWHUHVLV WKDW ELDVHV GHFLVLRQV WRZDUGV
SUHVHUYLQJ WKH VWDWXV TXR 7KH YDOXHV RI ERWK UHDO RSWLRQV DUH SRVLWLYHO\ FRUUHODWHG ZLWK WKH OHYHO RI
XQFHUWDLQW\LQSURMHFWYDOXHDQGZLWKWKHVL]HRIVXQNFRVWV
7KHXSSHUKDOIRIWKHFRUULGRRULVJHQHUDWHGE\WKHRSWLRQYDOXHWRSRVWSRQHLQYHVWPHQW
GHFLVLRQDQGFRQGLWLRQLWRQWKHDUULYDORQQHZLQIRUPDWLRQ7KHUHIRUHWKHLQYHVWPHQW
RSWLRQVKRXOGEHH[HUFLVHGRQO\ZKHQSURMHFWYDOXHULVHVDERYHWKHXSSHUOLQHLQ)LJXUH
%\ DQDORJ\ WKH ORZHU KDOI RI WKH FRUULGRRU LV JHQHUDWHG E\ WKH RSWLRQ YDOXH WR
SRVWSRQHDEDQGRQPHQWGHFLVLRQDQGWRFRQGLWLRQLWRQWKHDUULYDORQQHZLQIRUPDWLRQ,W
PD\ EH RSWLPDOIRU WKH SURMHFW WR DFFHSW VRPH ORVVHV IRU D ZKLOH LI WKHUH H[LVWV D KLJK
HQRXJK SUREDELOLW\WKDWWKLQJVZLOOWXUQEULJKWHULQWKHIXWXUH(VVHQWLDOLQ)LJXUHLV
WKHIDFWWKDWWKHSURMHFWZLOOQRWEHVWDUWHGXQOHVVSURMHFWYDOXHULVHVDERYHWKHFHLOLQJRI
WKH FRUULGRRU +RZHYHU RQFH XQGHUZD\ LW ZRQ·W EH DEDQGRQHG ZLWKRXW LWV YDOXH
GURSSLQJ EHORZ WKH ERWWRP RI WKH FRUULGRRU 7KHUHIRUH WKHUH H[LVWV D ZLGH DUHD IRU
SUHVHUYLQJWKHVWDWXVTXRLQHDFKVLWXDWLRQ)XUWKHUPRUHDVERWKRIWKHRSWLRQYDOXHVDUH
SRVLWLYHO\FRUUHODWHGZLWKWKHDPRXQWRIVXQNFRVWVDQGWRWDOXQFHUWDLQW\WKHLPSRUWDQFH
RIWKHVHRSWLRQVLVPDJQLILHGLQSKDUPDFHXWLFDO5 '
2SWLRQ7KHRUHWLF9DOXDWLRQRI5HDO2SWLRQV
7KXVIDUWKHDQDO\VLVRIUHDORSWLRQVKDVEHHQPRVWO\TXDOLWDWLYHLQQDWXUH,WLVWLPHWR
GHILQHDQGJLYHVKDSHWRWKHNH\YDULDEOHVDQGXQFHUWDLQWLHVPRUHIRUPDOO\
$VVHW'\QDPLFV
:H ILUVW GHILQH WKH SDWWHUQ RI FKDQJHV LQ WKH YDOXH RI WKH XQGHUO\LQJ DVVHW 7KLV LV D
QDWXUDOVWDUWLQJSRLQWVLQFHWKHYDOXHRIDQ\UHDORSWLRQGHSHQGVRQWKHFKDQJHVLQWKH
XQGHUO\LQJ DVVHW YDOXH 7KHVH IOXFWXDWLRQV FDQ EH PRGHOHG HLWKHU DV GLVFUHWH RU
FRQWLQXRXV
Discrete in Time
&RPSXWDWLRQDOO\ WKH HDVLHVW IRUP RI DVVHW G\QDPLFV LV JLYHQ E\ WKH ELQRPLDO ODWWLFH
PRGHO ,Q WKLV PRGHO DVVHW YDOXH LV DVVXPHG WR FKDQJH GLVFUHWHO\ RYHU D IL[HG WLPH
LQWHUYDO7KHJHQHUDOLGHDLVLOOXVWUDWHGLQ)LJXUH
$X
$X
$X
$XG
$X $XG
$XG
$ $XG $XG
$G $XG
$G
$X $G
)LJXUH %LQRPLDO ODWWLFH DVVHW PRGHO $VVHW YDOXH FDQ PRYH RQO\ D FRQVWDQW DPRXQW XSZDUGV RU
GRZQZDUGVDWHDFKGLVFUHWHWLPHLQWHUYDO
2IWHQWKHFKDQJHVLQDVVHWYDOXHDUHDVVXPHGWREHPXOWLSOLFDWLYHUHODWLYHWRWKHSUHYLRXV
YDOXH 7KH XSZDUG DQG GRZQZDUG FKDQJHV DUH UHSUHVHQWHG E\ X DQG G WKDW DUH ERWK
DVVXPHGSRVLWLYHZLWKX!DQGG7KHSUREDELOLW\RIDQXSZDUGPRYHPHQWLVGHQRWHG
E\SDQGWKHSUREDELOLW\RIDGRZQZDUGPRYHPHQWE\TZLWKST 7KHVKRUWHUWKH
WLPH LQWHUYDO LV PDGH WKH PRUH UHDOLVWLF WKH PRGHO EHFRPHV :KHQ WKH LQWHUYDO
DSSURDFKHV ]HUR WKH ELQRPLDO PRGHO DSSURDFKHV WKH FRQWLQXRXV FDVH $ GHULYDWLRQ IRU
WKHYDOXHVRISDUDPHWHUVLVUHSUHVHQWHGLQDSSHQGL[$'HVSLWHLWVHYLGHQWVLPSOLILFDWLRQV
WKH ELQRPLDO PRGHO IRU DVVHW G\QDPLFV SURYLGHV D IUDPHZRUN WR WKH YDOXDWLRQ RI
GLIIHUHQWW\SHVRIUHDORSWLRQV
Continuous in Time
$ULFKHUGHVFULSWLRQRIIOXFWXDWLRQVLQDVVHWYDOXHLVDWWDLQHGLIWKHFKDQJHVDUHPRGHOOHG
YLD GLIIXVLRQ SURFHVVHV LH FRQWLQXRXVWLPH VWRFKDVWLF SURFHVVHV ,Q D JHQHUDO IRUP
/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
7KHELQRPLDOPRGHOLVDQH[DPSOHRIDGLVFUHWHWLPHVWRFKDVWLFSURFHVVPRUHVSHFLILFDOO\DGLVFUHWHVWDWH
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
WKH\FDQEHH[SUHVVHGDV,WRSURFHVVHV
dx = a ( x, t )dt + b( x, t )dz
dz = εt t
ZKHUH εt LV D QRUPDOO\ GLVWULEXWHG UDQGRP YDULDEOH D PHDQ RI ]HUR DQG D VWDQGDUG
GHYLDWLRQRI$VSHFLDOFDVHRIHTXDWLRQLVWKHJHRPHWULF%URZQLDQPRWLRQZLWKGULIW,WLVD
VWDQGDUGSURFHVVLQPRVWUHDORSWLRQDSSOLFDWLRQVDQGLWLVGHILQHGDV
dx = αxdt + σxdz
ZKHUH α LV WKH LQVWDQWDQHRXV JURZWK UDWH SDUDPHWHU DQG σ LV WKH LQVWDQWDQHRXV
SURSRUWLRQDOYDULDQFHSDUDPHWHU,QHTXDWLRQWKHORQJWHUPWUHQGRIFKDQJHVLQDVVHW
YDOXHLVUHSUHVHQWHGE\WKHGULIWSDUDPHWHUZKHUHDVVKRUWWHUPYRODWLOLW\LVGHULYHGIURP
WKHFRPELQHGHIIHFWRIWKHYDULDQFHSDUDPHWHUDQGWKH:LHQHULQFUHPHQW,WRSURFHVVHV
FDQDOVRWDNHDOWHUQDWLYHXVHIXOIRUPVWKH\FDQEHPHDQUHYHUWLQJPHDQLQJWKDWLQWKHORQJ
UXQ WKH GULIW SDUDPHWHU DSSURDFKHV ]HUR RU WKH SURFHVV FDQ LQFOXGH GLVFUHWH MXPSV ,Q
WKLVFDVHWKHFKDQJHVLQDVVHWYDOXHFDQEHPRGHOHGZLWK3RLVVRQMXPSSURFHVVHV
$ FRPSUHKHQVLYH FRYHUDJH RI WKH DERYH SURFHVVHV LV QRW QHFHVVDU\ LQ WKLV FRQWH[W
+RZHYHU WKH NH\ DVVXPSWLRQV DQG LPSOLFDWLRQV RI HTXDWLRQV ² LQ WKH FRQWH[W RI
SKDUPDFHXWLFDO 5 ' DUH UHLWHUDWHG KHUH )LUVW D EDVLF FKDUDFWHULVWLF LV WKH 0DUNRY
SURSHUW\ 7KLV PHDQV WKDW WKH SUREDELOLW\ GLVWULEXWLRQ IRU xt + 1 GHSHQGV RQO\ RQ xt ,Q
HVVHQFH ZH DVVXPH WKDW WKH FXUUHQW VWDWH RI WKH 5 ' SURMHFW LV DOO WKDW LV QHHGHG WR
IRUHFDVW IXWXUH YDOXHV (YHU\ SULRU VWDWH RI WKH SURMHFW LV DVVXPHG LUUHOHYDQW LQ
IRUHFDVWLQJ 6HFRQG WKH LQFUHPHQWDO FKDQJHV LQ SURMHFW YDOXH DUH DVVXPHG WR EH
LQGHSHQGHQW RI HDFK RWKHU 7KLV PHDQV WKDW LI WKH SURMHFW YDOXH LV NQRZQ WR KDYH
LQFUHDVHGGXULQJSUHYLRXVWLPHLQFUHPHQWWKLVGRHVQRWSURYLGHDQ\LQIRUPDWLRQRQWKH
GLUHFWLRQRIWKHIROORZLQJVWHSLQSURMHFWYDOXH7KLUGWKHFKDQJHVLQSURMHFWYDOXHDUH
DVVXPHG WR EH QRUPDOO\ GLVWULEXWHG 7KLV LV FOHDUO\ DQ XQUHDOLVWLF DVVXPSWLRQ VLQFH
SURMHFW YDOXHV FDQ QHYHU IDOO EHORZ ]HUR +RZHYHU ZLWK EDVLF WRROV IURP VWRFKDVWLF
FDOFXOXV ZHFDQWUDQVIRUPWKHVHOHFWHG:LHQHUSURFHVVVRWKDWWKHORJDULWKPRISURMHFW
7KHPRVWVXEWOHDVVXPSWLRQKRZHYHULVUHODWHGWRWKHW\SHRISURFHVVWKDWLVFKRVHQWR
PRGHOWKHFKDQJHVLQWKHXQGHUO\LQJDVVHWYDOXH,QFDVHRIILQDQFLDODVVHWVDFRQWLQXRXV
UDQGRPZDON
)RUDQLQWURGXFWLRQRQVWRFKDVWLFSURFHVVHVLQJHQHUDOUHDORSWLRQFRQWH[WVHH'L[LW$.3LQG\FN56
,QYHVWPHQW8QFHU8QFHUWDLQW\3ULQFHWRQ8QLYHUVLW\3UHVVFKDSWHU
,WR·VOHPPDLQSDUWLFXODU
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
VWRFKDVWLF SURFHVV PRGHOV FKDQJHV LQ DVVHW YDOXH UHDOLVWLFDOO\ VLQFH VWRFN SULFHV FKDQJH
FRQWLQXRXVO\ZLWKWKHDUULYDORIQHZLQIRUPDWLRQ+RZHYHUZLWKUHDODVVHWVWKHVLWXDWLRQ
LV GLIIHUHQW $VVXPLQJ FRQWLQXRXV FKDQJHV LQ DVVHW YDOXH LV VRPHZKDW TXHVWLRQDEOH
EHFDXVH IRU H[DPSOH LQQRYDWLRQV GXULQJ DQ 5 ' SURMHFW KDSSHQ GLVFUHWHO\ QRW
FRQWLQXRXVO\ 0RUHRYHUFKDQJHVLQPDUNHWVWUXFWXUHIRUH[DPSOHDQLQWURGXFWLRQRID
FRPSHWLQJSURGXFWDUULYHDWGLVFUHWHSRLQWVLQWLPHDQGWKHLUDIIHFWRQSURMHFWYDOXHPD\
QRWEHORJQRUPDOO\GLVWULEXWHG7KHVHFDYHDWVDUHH[DFHUEDWHGWKHVKRUWHUDQGWKHPRUH
UDQGRP WKH UHDO SURFHVV XQGHU VWXG\ LV +RZHYHU GHYLDWLRQV IURP PRGHO DVVXPSWLRQV
FDQ EH H[SHFWHG WR ´VPRRWKHQ RXWµ LQ FDVH RI SKDUPDFHXWLFDO 5 ' EHFDXVH WKH
GHYHORSPHQWWLPHVDUHYHU\ORQJ7KHUHIRUH DOWKRXJKWKHFKDQJHVLQSURMHFW YDOXH PD\ QRW EH
H[SHFWHG WR WDNH DQ\ VSHFLILF IRUP LQ WKH VKRUWWHUP ORQJWHUP FKDQJHV RYHU WKH GXUDWLRQ RI DQ HQWLUH
SURMHFWFDQEHPRGHOHGDVORJQRUPDOMXVWLI\LQJWKHXVHFRQWLQXRXV%URZQLDQSURFHVVHV
*HQHUDO$VVXPSWLRQV
7ZREDVLFDVVXPSWLRQVRQWKHDFWLRQVRIUDWLRQDOLQYHVWRUVZKLFKH[SODLQWKHUDWLRQDOH
EHKLQGRSWLRQWKHRUHWLFYDOXDWLRQPHWKRGVDUHLQWURGXFHG
No Arbitrage Principle
7KLVSULQFLSOHVWDWHVWKDWLWLVQRWSRVVLEOHWREX\DQDVVHWDQGWRVHOOLWLPPHGLDWHO\DWD
KLJKHUSULFHWKHUHE\HDUQLQJDULVNOHVVSURILW/XHQEHUJHUGHILQHVWZRW\SHVRIDUELWUDJH
RSSRUWXQLWLHV 7\SH$DUELWUDJHUHIHUVWRDSRVVLELOLW\RILPPHGLDWHULVNOHVVSURILWDQG
W\SH%DUELWUDJHUHIHUVWRDSRVLWLYHSUREDELOLW\RIDQLQYHVWPHQW\LHOGLQJDULVNOHVVSD\RII
Risk Neutrality
0RVWSHRSOHDUHULVNDYHUVH7KLVPHDQVOHVVYDULDQFHLVSUHIHUUHGWRPRUHZLWKWKHVDPH
H[SHFWHG YDOXH RI PRQHWDU\ UHWXUQV 2QH RI WKH FHQWUDO WKHPHV RI WKLV WKHVLV LV WR
FKDUDFWHULVH WKH UROH RI ULVN DQG RI LWV YDU\LQJ OHYHO DV ZHOO DV FRPSRQHQWV LQ
SKDUPDFHXWLFDO 5 ' 2SWLRQWKHRUHWLF YDOXDWLRQ RI LQYHVWPHQW RSSRUWXQLWLWHV SURYHV
ZHOO VXLWHG WR VLWXDWLRQV ZLWK D KLJKO\ YDULDEOH ULVN VWUXFWXUH :H FDQ VLPSOLI\ WKH
WUHDWPHQW RI ULVN VXEVWDQWLDOO\ E\ FUHDWLQJ D UHSOLFDWLQJ SRUWIROLR IURP PDUNHWSULFHG
DVVHWVZLWKVLPLODUULVNFKDUDFWHULVWLFVDVWKH5 'SURMHFWXQGHUVWXG\%\FRQVWUXFWLQJD
ULVNOHVV KHGJH IURP H[LVWLQJ DVVHWV LQYHVWRUV· VXEMHFWLYH ULVN DWWLWXGHV GR QRW PDWWHU
VLPSO\EHFDXVHWKHUHUHPDLQVQRULVNOHIWLQLQYHVWLQJLQWKHSURMHFW7KLVLVDSRZHUIXO
FRQFHSWZLWKIDUUHDFKLQJLPSOLFDWLRQV%\G\QDPLFDOO\DGMXVWLQJWKHUHSOLFDWLQJSRUWIROLR
WR KHGJH DJDLQVW WKH FKDQJLQJ OHYHO RI WRWDO ULVN ZH DUH HIIHFWLYHO\ LQ D ULVNIUHH ZRUOG
ZKHUHDOODVVHWVHDUQWKHULVNIUHHUDWHRIUHWXUQ 7RVXPPDUL]HZLWKWKHRSWLRQSULFLQJ
DSSURDFK ZH DUH DEOH WR PRGLI\ RXU HVWLPDWHV RI WKH ULVN\ FDVKIORZV DQG WR GLVFRXQW
WKHP ZLWKDULVNIUHHLQWHUHVWUDWHWKHUHE\ DYRLGLQJ WKH GLIILFXOWLHV RI ILQGLQJ D FRUUHFW
ULVNSUHPLXP,QWKHQH[WSDUDJUDSKLWLVVKRZQKRZWRGHILQHWKHFRPSRQHQWVIRUWKH
UHSOLFDWLQJSRUWIROLR
%HIRUHSURFHHGLQJZHVWDWHWKHNH\DVVXPSWLRQVRIWKHSUHVHQWHGULVNQHXWUDOYDOXDWLRQ
3HQQLQJV ( /LQW 2 7KH 2SWLRQ 9DOXH RI $GYDQFHG 5 ' (XURSHDQ -RXUQDO RI 2SHUDWLRQDO
5HVHDUFK9ROSS
/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
7ULJHRUJLV / 5HDO 2SWLRQV 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH $OORFDWLRQ 0,7
3UHVVSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
DSSURDFK )LUVW WKHUH VKRXOG EH QR WUDQVDFWLRQ FRVWV QRU WD[HV LQ HVWDEOLVKLQJ DQG LQ
XSGDWLQJWKHSRUWIROLR6HFRQGWKHPDUNHWRIH[LVWLQJDVVHWVVKRXOGEHFRPSOHWHLQWKH
VHQVH WKDW SD\RIIV IURP WKH 5 ' SURMHFW FDQ EH UHSOLFDWHG ZLWK D PL[WXUH RI H[LVWLQJ
PDUNHWSULFHGDVVHWV ,QWKHFDVHRISKDUPDFHXWLFDO5 'ZKHUHZHKDYHRQHDVVHWWR
EHKHGJHGLHWKHRSWLRQWRLQYHVWLQWKHXQGHUO\LQJSURMHFWLWVHOIWKHUHTXLUHGQXPEHU
RIPDUNHWSULFHGDVVHWVLVWZR7KHVHFRXOGEHDPDUNHWSULFHGWZLQSURMHFWZLWKVLPLODU
ULVNFKDUDFWHULVWLFVDVWKHXQGHUO\LQJSURMHFWDQGDULVNOHVVERQG
,WVKRXOGEHVWUHVVHGWKDWWKHFRQFHSWXDOMXVWLILFDWLRQIRUWKHRSWLRQSULFLQJDSSURDFKLV
QRWZHDNHUWKDQWKDWRQHEHKLQGWKHWUDGLWLRQDOPHWKRGV7KHXVHRIHLWKHUGLVFRXQWHG
FDVKIORZEDVHGPHWKRGVRUWKHRSWLRQWKHRUHWLFDSSURDFKUHTXLUHVWKHLGHQWLILFDWLRQRID
WZLQ DVVHW WKDW KDV VLPLODU ULVN FKDUDFWHULVWLFV WKDQ WKH XQGHUO\LQJ SURMHFW DQG WKDW LV
WUDGHGLQWKHPDUNHW+RZHYHUULVNQHXWUDOYDOXDWLRQDGMXVWVEHWWHUWRWKHFKDQJLQJOHYHO
RIWRWDOULVNE\G\QDPLFDOO\DGMXVWLQJWKHFRPSRVLWLRQRIWKHUHSOLFDWLQJSRUWIROLR7KLVLV
ZK\ RSWLRQ SULFLQJ DSSURDFK JLYHV D UHVXOW WKDW PD\ EH FORVHU WR UHDOLW\ WKDQ WKH RQH
DWWDLQHGZLWKWKHWUDGLWLRQDOPHWKRGV
7KHH[SRVLWLRQRIWKHDVVXPSWLRQVPD\KDYHEHHQOHIWRQDWKHRUHWLFDOOHYHO+RZHYHU
WKH IROORZLQJ LQWURGXFWLRQ RI YDOXDWLRQ PHWKRGV DQG H[DPSOHV KHOS EULGJH WKH JDS
EHWZHHQWKHRU\DQGSUDFWLFH
2SWLRQ7KHRUHWLF9DOXDWLRQ0HWKRGV
)ROORZLQJWKHRUGHURIH[SRVLWLRQRQDVVHWG\QDPLFVZHVWDUWZLWKWKHGLVFUHWHFDVH
%LQRPLDO/DWWLFH
7KHVWUHQJWKRIWKHELQRPLDOPRGHOLVWKHDELOLW\WRKDQGOHDYDULHW\RIGLIIHUHQWRSWLRQV
\HWSUHVHUYLQJLQWXLWLRQLQWKHFDOFXODWLRQV
$VVXPHWKDWZHKDYHWRSULFHDFDOORSWLRQWKDWJLYHVXVWKHULJKWWRDFTXLUHDQDVVHWIRU
DQ H[HUFLVH SULFH . RQO\ DW WKH HQG RI WKH SHULRG 7KXV ZH KDYH D RQHSHULRG
(XURSHDQRSWLRQWRYDOXH)XUWKHUPRUHDVVXPHWKDWWKHDVVHWG\QDPLFVLVGHVFULEHGE\
WKH ELQRPLDO PRGHO LH DW WKH WLPH RI H[HUFLVH WKH FXUUHQW DVVHW YDOXH $ KDV PRYHG
XSZDUGV \LHOGLQJ $X RU GRZQZDUGV \LHOGLQJ $G 7KH FRPSRQHQWV RI WKH UHSOLFDWLQJ
SRUWIROLRLQWKLVFDVHZRXOGEHWKHXQGHUO\LQJDVVHWLWVHOISOXVVRPHDPRXQWRIDULVNIUHH
ORDQ \LHOGLQJ D UHWXUQ 5 GXULQJ WKH SHULRG 7KH ELQRPLDO ODWWLFHV IRU FKDQJHV LQ WKH
YDOXHRIWKHVHWKUHHDVVHWVDUHLOOXVWUDWHGLQ)LJXUH
3DOHRORJR * $ 2SWLRQ 3ULFLQJ 7KHRU\ DQG 'HFLVLRQ $QDO\VLV 5HVHDUFK 3DSHU 'UDIW
6HSWHPEHU 6WDQIRUG8QLYHUVLW\SS
WK
6PLWK - ( 1DX 5 ) 9DOXLQJ 5LVN\ 3URMHFWV 2SWLRQ 3ULFLQJ 7KHRU\ DQG 'HFLVLRQ $QDO\VLV
0DQDJHPHQW6FLHQFH9RO1R0D\SS
$PUDP0.XODWLODND1'LVFLSOLQHG'HFLVLRQV$OLJQLQJ'HFLVLRQV:LWKWKH)LQDQFLDO0DUNHWV
+DUYDUG%XVLQHVV5HYLHZ-DQXDU\)HEUXDU\SS
7KLVH[DPSOHLVDGDSWHGIURP/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
7RH[FOXGHDUELWUDJHRSSRUWXQLWLHVZHPXVWKDYHX!5!G
$ 2
$G
0D[$G. 5
)LJXUH7KUHHUHODWHGODWWLFHVWKDWGHSLFWFKDQJHVLQDVVHWYDOXHRIDFDOORSWLRQXQGHUO\LQJDVVHWDQG
DULVNIUHHORDQDIWHURQHSHULRG1RWHWKDWWKHORDQ\LHOGVDUHWXUQ5XQGHUDQ\FLUFXPVWDQFHV
7KHNH\LQVLJKWWKDWLVQHHGHGWRHYDOXDWHWKHFXUUHQWRSWLRQYDOXH2LVWRUHDOL]HWKDWDOO
RWKHUYDOXHVLQWKHWKUHHODWWLFHVDUHNQRZQDQGWRH[SORLWWKDWLQIRUPDWLRQWRFRQVWUXFW
DSRUWIROLRRIDVVHWVWKDWPLPLFVWKHSRVVLEOHUHWXUQVIRUPKROGLQJWKHFDOORSWLRQ7KLV
PL[WXUH RI PDUNHWSULFHG DVVHWV FRQVWLWXWHV WKH UHSOLFDWLQJ SRUWIROLR WKDW FDQ EH
G\QDPLFDOO\DGMXVWHGZKHQPRUHSHULRGVDUHDGGHGLQWRWKHPRGHO
/HWXVGHQRWH
2 PD[$X.
X
2 PD[$G.
G
,Q RWKHU ZRUGV 2 DQG 2 GHVFULEH WKH SRVVLEOH SD\RIIV IURP KROGLQJ WKH RSWLRQ ,Q
X G
RUGHUWRGXSOLFDWHWKHVHSD\RIIVOHW·VEX\DQXQNQRZQDPRXQW[RIWKHDVVHW$DQGDQ
XQNQRZQDPRXQW\RI WKH ULVN IUHH ORDQ ,I WKHVH WUDQVDFWLRQV DUH WR SURYLGH XV ZLWK
H[DFWO\WKHVDPHSD\RIIVWKDQKROGLQJWKHRSWLRQZRXOGZHPXVWUHTXLUH
2 X[5\
X
2 G G[5\
1RZZHKDYHWZRXQNQRZQV[DQG\LQWZRHTXDWLRQVVRWKHXQNQRZQVFDQEH
VROYHGZLWKHOHPHQWDU\DOJHEUD:HREWDLQ
Ou − Od
x=
u−d
uOd − dOu
y=
R(u − d )
)XUWKHUPRUHLIZHGHILQH
R−d
q=
u−d
WRWDOUHSOLFDWLQJSRUWIROLRYDOXHFDQEHZULWWHQDV
x+ y=
1
[qOu + (1 − q)Od ].
R
1RZFRPHVWKHFUXFLDOVWHSWKHYDOXHRIWKLVUHSOLFDWLQJSRUWIROLRLVDOVRWKHYDOXHRIWKHFDOORSWLRQ
7KLVDUJXPHQWLVGHULYHGIURPWKHQRDUELWUDJHDVVXPSWLRQ6LQFHWKHFUHDWHGSRUWIROLR
SURGXFHVH[DFWO\WKHVDPHUHWXUQVDVWKHFDOORSWLRQERWKDVVHWVPXVWEHYDOXHGHTXDOO\
LQ WKH PDUNHWSODFH 2WKHUZLVH WKHUH ZRXOG H[LVW D SRVVLELOLW\ IRU D ULVNOHVV SURILW
7KHUHIRUHZHFRQFOXGHWKDWWKHYDOXHRIWKHFDOORSWLRQLV
O=
1
[qOu + (1 − q)Od ].
R
DQG2 WKDWDUHGLVFRXQWHGEDFNWRWKHSUHVHQWWLPHXVLQJWKHULVNIUHHGLVFRXQWUDWH5
G
7KLVLVFRUUHFWVLQFHWKHSRVVLEOHRXWFRPHVDUHZHLJKWHGE\ULVNQHXWUDOSUREDELOLWLHVTDQG
T EHIRUH GLVFRXQWLQJ ,Q HVVHQFH WKH ULVNLQHVV RI WKH SD\RIIV LV VTXHH]HG LQWR WKH
SUREDELOLW\GHILQHGLQHTXDWLRQ
:KDW LV UHPDUNDEOH LQ HTXDWLRQ LV WKDW RSWLRQ YDOXH GRHV QRW GHSHQG RQ WKH
SUREDELOLW\ RI DQ XSZDUG PRYHPHQW X ,Q IDFW ZH KDYHQ·W HYHQ KDG WR GHILQH VXFK D
YDULDEOHLQRUGHUWRGHULYHDFRUUHFWYDOXDWLRQIRUWKHSULFHRIWKHRSWLRQ
7KHVROXWLRQSURFHVVFDQEHJHQHUDOLVHGDQGWDLORUHGWRYDOXHPXOWLSOHW\SHVRIRSWLRQV
SXWVRUFDOOV$PHULFDQRU(XURSHDQ7KHIXQGDPHQWDOLGHDLVWKDWDOWKRXJKWKHQXPEHU
RISRVVLEOHSDWKVJURZVOLQHDUO\WKHHQGYDOXHVLQWKHODWWLFHDUHNQRZQ7KHYDOXDWLRQRI
DQ RSWLRQ LV RQO\ D PDWWHU RI VWDUWLQJ IURP WKH HQG RI WKH ODWWLFH DQG UROOLQJ EDFN WKH
RSWLRQYDOXHVEDFNWRWKHSUHVHQWWLPH$WUDGHRIIEHWZHHQWKHDPRXQWRIFRPSXWDWLRQ
DQGUHDOLVPRIWKHPRGHOKDVWREHPDGHZKHQIL[LQJWKHOHQJWKRIWKHWLPHVWHSLQWKH
ODWWLFH7KHPRUHSHULRGVDUHDGGHGLQWKHPRGHOWKHPRUHFXPEHUVRPHWKHFDOFXODWLRQV
EHFRPH$WZRSHULRGELQRPLDOODWWLFHLVLOOXVWUDWHGLQ)LJXUH
)URPWKHHDUOLHUDVVXPSWLRQRIX!5!GIROORZVTVRTFDQEHFRQVLGHUHGDVDWUXHSUREDELOLW\
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
2XX
2X
2XG
2G
2GG
)LJXUH$WZRSHULRGELQRPLDOODWWLFHGHVFULELQJFKDQJHVLQFDOORSWLRQYDOXH
8VLQJWKHQRWDWLRQVRIWKHVLQJOHSHULRGH[DPSOHZHFDQZULWH
2 PD[$X .
XX
2 PD[$XG.
XG
2 PD[$G .
GG
7KHVH DUH WKH YDOXHV WKDW DUH XVHG WR FDOFXODWH WKH RSWLRQ YDOXH LQ SHULRG RQH 0RUH
VSHFLILFDOO\
Ou =
1
[qOuu + (1 − q)Oud ],
R
Od = [qOud + (1 − q )Odd ],
1
R
ZKHUH WKH ULVN QHXWUDO SUREDELOLW\ LV GHILQHG DV LQ HTXDWLRQ :LWK WKH KHOS RI
HTXDWLRQVZHDUULYHDWWKHSUHVHQWYDOXHRIWKHRSWLRQYDOXH$VLQHTXDWLRQ
FDOORSWLRQYDOXHLVQRZ
O = [qOu + (1 − q )Od ].
1
R
$FRPSUHKHQVLYHDSSOLFDWLRQXVLQJWKHELQRPLDOODWWLFHDSSURDFKLVSUHVHQWHGLQFKDSWHU
ZKHQHYDOXDWLQJWKHUHDORSWLRQVHPEHGGHGLQWKHFDVHSURMHFW
&RQWLQXRXV&RQWLQJHQW&ODLPV$QDO\VLV
7KH GLVFUHWH ELQRPLDO YHUVLRQ RI WKH RSWLRQ YDOXDWLRQ DSSURDFK RI FKDSWHU ZDV
GHULYHG VL[ \HDUV DIWHU WKH FRQWLQXRXV YHUVLRQ IRU WKH VROXWLRQ ZDV LQWURGXFHG
+RZHYHUPRGHOLQJDVVHWYDOXHIOXFWXDWLRQVDVFRQWLQXRXVHQKDQFHVWKHULFKQHVVRIWKH
$VVXPLQJWKDWQRHDUO\H[HUFLVHWDNHVSODFHZKLFKFDQEHVKRZQQRUDWLRQDOLQYHVWRUZRXOGGR
&R[ -& ,QJHUVROO -( 5XELQVWHLQ 0 2SWLRQ 3ULFLQJ $ 6LPSOLILHG $SSURDFK -RXUQDO RI
)LQDQFLDO(FRQRPLFV9ROSS
%ODFN ) 6FKROHV 0 7KH 3ULFLQJ RI 2SWLRQV DQG &RUSRUDWH /LDELOLWLHV -RXUQDO RI 3ROLWLFDO
(FRQRP\SS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
DQDO\VLV VLJQLILFDQWO\ DV JHQHUDO ,WRSURFHVVHV JLYH PRUH H[DFW UHVXOWV IURP WKH
FDOFXODWLRQVWKDQWKHODWWLFHIUDPHZRUN'XHWRWKHWHFKQLFDOQDWXUHRIWKHVXEMHFWRSWLRQ
YDOXDWLRQLQWKHFDVHRIFRQWLQXRXVDVVHWYDOXHIOXFWXDWLRQVLVSUHVHQWHGLQDSSHQGL[%,Q
JHQHUDOZHDUULYHDWDSDUWLDOGLIIHUHQWLDOHTXDWLRQSGHDQGDVHWRIERXQGDU\FRQGLWLRQV
WKDW GHWHUPLQH WKH RSWLRQ YDOXH 2QO\ VHOGRP GR WKH HTXDWLRQV KDYH DQ DQDO\WLFDO
VROXWLRQ VR LQ PRVW FDVHV QXPHULFDO PHWKRGV DUH UHTXLUHG (LWKHU WKH XQGHUO\LQJ
VWRFKDVWLF SURFHVVHV PXVW EH DSSUR[LPDWHG DQG WKH UHVXOWLQJ HTXDWLRQV VROYHG
DQDO\WLFDOO\ RU DSSUR[LPDWLYH VROXWLRQV FDQ EH GHULYHG IRU WKH UHVXOWLQJ SDUWLDO
GLIIHUHQWLDO HTXDWLRQV ,Q DQ\ FDVH LQWXLWLRQ LV HDVLO\ ORVW LQ WKH VHDUFK IRU DQ H[DFW
VROXWLRQFRPSDUHGWRWKHXVHRIWKHELQRPLDOODWWLFHDSSURDFK
6WRFKDVWLF'\QDPLF3URJUDPPLQJ
7KHVWDUWLQJSRLQWLQWKLVDOJRULWKPGLIIHUVVXEVWDQWLDOO\IURPERWKWKHGLVFUHWHDQGWKH
FRQWLQXRXV FRQWLQJHQW FODLPV PHWKRGRORJLHV (VVHQWLDOO\ LQ G\QDPLF SURJUDPPLQJ WKH
139RIHDFKSRVVLEOHLQYHVWPHQWVWUDWHJ\LVFRPSXWHGDQGWKHRQH\LHOGLQJWKHKLJKHVW
YDOXHLVVHOHFWHG 6WUDWHJLHVWKDWLQFOXGHUHOHYDQWUHDORSWLRQYDOXHVDUHLQOFXGHGLQWKH
VROXWLRQVWUDWHJ\VSDFH7KHVHTXHQFHRIRSWLPDOGHFLVLRQPDNLQJDWHDFKVWHSLVGLYLGHG
LQWR WZR SDUWV WR WKH FXUUHQW RSWLPDO GHFLVLRQ DQG WR WKH RSWLPDOLW\ RI DOO IXWXUH
GHFLVLRQVDFFRUGLQJWRWKHSULQFLSOHRIRSWLPDOLW\E\%HOOPDQ$PRUHIRUPDOGHULYDWLRQ
RIWKHUHVXOWLQJSDUWLDOGLIIHUHQWLDOHTXDWLRQVLVSUHVHQWHGLQDSSHQGL[&
+RZHYHU WKH DSSURDFK LV QRW ZHOO VXLWHG WR LQYHVWPHQW SUREOHPV ZKHUH WKHUH LV KLJK
YDULHW\ LQ WKH OHYHO RI WRWDO ULVN VXFK DV LQ SKDUPDFHXWLFDO 5 ' 7KLV VWHPV IURP WKH
DVVXPSWLRQ RI DQ H[RJHQRXVO\ GHILQHG GLVFRXQW UDWH WKDW LQFOXGHV D SUHPLXP IRU WKH
ULVNLQHVV RI WKH FDVKIORZ HVWLPDWHV (VVHQWLDOO\ WKH G\QDPLF SURJUDPPLQJ DSSURDFK
UHVHPEOHVWUDGLWLRQDOYDOXDWLRQPHWKRGVE\WUHDWLQJSURMHFWULVNDVDQH[RJHQRXVYDULDEOH
+RZHYHU DV LV VKRZQ LQ DSSHQGL[ & WKH UHVXOWLQJ HTXDWLRQV DUH UHPDUNDEO\ VLPLODU WR
WKRVHDWWDLQHGE\XVLQJWKHFRQWLQJHQWFODLPVPHWKRGRORJ\
6RPH DWWHPSWV WR FRPELQH WKH WZR PHWKRGRORJLHV KDYH EHHQ SUHVHQWHG LQ WKH
OLWHUDWXUH 7KH LGHD KDV EHHQ WR VKRZ KRZ WKH PHWKRGRORJ\ EHKLQG FRQWLQJHQW
FODLPVFDQEHXVHGWRVLPSOLI\WKHDQDO\VLVRIULVNZKHQVRPHSDUWRIULVNFDQEHKHGJHG
E\ WUDGLQJ &RQYHUVHO\ G\QDPLF SURJUDPPLQJ DSSURDFK KDV EHHQ DSSOLHG WR H[WHQG
YDOLGLW\LQSUREOHPVZLWKLQFRPSOHWHDVVHWPDUNHWV7KLV´LQWHJUDWHGUROOEDFNSURFHGXUHµ
GRHV QRW LQFOXGH DQ\ QHZ WKHRUHWLFDO EUHDNWKURXJKV EXW DOOHYLDWHV WKH FRPSXWDWLRQDO
GLIILFXOWLHVLQERWKDSSURDFKHV
7KLVLVWKHSULQFLSOHEHKLQGWKHELQRPLDOODWWLFHPRGHO
)RU D FRPSDULVRQ EHWZHHQ GLIIHUHQW PHWKRGV VHH *HVNH 5 6KDVWUL . 9DOXDWLRQ E\
$SSUR[LPDWLRQ $ &RPSDULVRQ RI $OWHUQDWLYH 2SWLRQ 9DOXDWLRQ 7HFKQLTXHV -RXUQDO RI )LQDQFLDO DQG
4XDQWLWDWLYH$QDO\VLV9ROSSRU7ULJHRUJLV/$/RJ7UDQVIRUPHG%LQRPLDO1XPHULFDO
$QDO\VLV 0HWKRG IRU 9DOXLQJ &RPSOH[ 0XOWL2SWLRQ ,QYHVWPHQW -RXUQDO RI )LQDQFLDO DQG 4XDQWLWDWLYH
$QDO\VLV6HSWHPEHUSS
3LQG\FN56,UUHYHUVLELOLW\8QFHUWDLQW\DQG,QYHVWPHQW-RXUQDORI(FRQRPLF/LWHUDWXUH;;,;
SS
6PLWK - ( 1DX 5 ) 9DOXLQJ 5LVN\ 3URMHFWV 2SWLRQ 3ULFLQJ 7KHRU\ DQG 'HFLVLRQ $QDO\VLV
0DQDJHPHQW6FLHQFH9RO1R0D\SS
6PLWK - ( 0F&DUGOH . ) 9DOXLQJ 2LO 3URSHUWLHV ,QWHJUDWLQJ 2SWLRQ 3ULFLQJ DQG 'HFLVLRQ
$QDO\VLV$SSURDFKHV2SHUDWLRQV5HVHDUFK9RO1RSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
3DUDPHWHU(VWLPDWLRQ
7KLVVHFWLRQSUHVHQWVIRUPDOPHWKRGVIRUHVWLPDWLQJWKHSDUDPHWHUVRIRSWLRQYDOXDWLRQ
,Q JHQHUDO LQ FRQWUDVW WR ILQDQFLDO DVVHWV WKH HVWLPDWLRQ RI SDUDPHWHUV IRU UHDO RSWLRQ
YDOXDWLRQLQYROYHVDGHJUHHRIVXEMHFWLYLW\7KLVLVQDWXUDOVLQFHWKHUHOHYDQWUHDORSWLRQV
DQG WKHLU FKDUDFWHULVWLFV DUH EHVW LGHQWLILHG DQG GHVFULEHG E\ WKH H[SHUWV LQYROYHG ZLWK
WKHP)RUH[DPSOHWKHPHPEHUVRIWKH5 'SURMHFWWHDPDUHWKHPRVWNQRZOHGJHDEOH
SHRSOHWRSURYLGHLQSXWIRUWKHLGHQWLILFDWLRQDQGYDOXDWLRQRIUHOHYDQWUHDORSWLRQV
2XWRIWKHVL[UHTXLUHGLQSXWV WKHIROORZLQJIRXUDUHUHODWLYHO\HDVLO\GHILQHG5LVNIUHH
LQWHUHVW UDWH FDQ EH HVWLPDWHG E\ REVHUYLQJ WKH \LHOG RQ JRYHUQPHQW ERQGV ([HUFLVH
SULFH FRQVLVWV VLPSO\ RI WKH LQYHVWPHQW FRVWV WKDW DUH DVVXPHG WR EH NQRZQ LQ PRVW
FDVHV 7LPHWRPDWXULW\LQUHDORSWLRQDQDO\VLVLVQRWDVIL[HGDVZLWKILQDQFLDORSWLRQV
EXWFDQEHGHILQHGZLWKVXIILFLHQWDFFXUDF\&XUUHQWSULFHRIWKHXQGHUO\LQJDVVHWLVQRW
GLUHFWO\REVHUYDEOHIURPPDUNHWSULFHVLQWKHFDVHRIQRQWUDGHGDVVHWV+RZHYHUZLWK
WKHKHOSRIQHWSUHVHQWYDOXHFDOFXODWLRQVDQHVWLPDWHIRULWVYDOXHFDQEHGHULYHG
7KH PRVW VHULRXV GLIILFXOWLHV LQ SDUDPHWHU HVWLPDWLRQ DUH HQFRXQWHUHG ZKHQ
JXHVWLPDWLQJUHOLDEOHYDOXHVIRUDVVHWYRODWLOLW\DQGGLYLGHQG\LHOG0RGHOVEXLOGLQJXSRQ
FRQWLQXRXV VWRFKDVWLF SURFHVVHV HJ JHRPHWULF %URZQLDQ PRWLRQ DVVXPH FRQVWDQW
YRODWLOLW\ ZKLFK LQ VRPH FDVHV PD\ QRW EH D UHDOLVWLF DVVXPSWLRQ $PUDP DQG
.XODWLODND DUJXHVWURQJO\IRUFRQVWDQWYRODWLOLW\DQGSUHVHQWHPSLULFDOHYLGHQFHWREDFN
XSWKHLUFODLPWKRXJK,QJHQHUDOFRQVWDQWYRODWLOLW\DVVXPSWLRQLVDSUREOHPDWLFSRLQWLQ
PRVW IRUHFDVWLQJ PHWKRGRORJLHV DQG RQH RI WKH IHZ UHPHGLHV FRXOG EH WR LQFOXGH D
IDFWRUIRUH[RJHQRXVVKRFNVLQWRWKHPRGHO$OVR*$5&+DQG$5&+PHWKRGVFRXOG
EH XVHG IRU JLYLQJ VWUXFWXUH WR DVVHW YRODWLOLW\ +RZHYHU LW LV TXHVWLRQDEOH ZKHWKHU
WKHVH PRGHOLQJ WRROV ZRXOG LPSURYH WKH UHVXOWV VXIILFLHQWO\ WR FRYHU IRU WKH FRVW RI
DGGLWLRQDOGHWDLODQGORVVRILQWXLWLRQ7KHUHE\LWFDQEHDVVXPHGWKDWFRQVWDQWYRODWLOLW\
LQDVVHWYDOXHUHIOHFWVUHDOOLIHFRQGLWLRQVUHDVRQDEO\ZHOORYHUDORQJLQYHVWPHQWSHULRG
VXFKDV\HDUV
7KRXJKDVVXPHGFRQVWDQWDYDOXHIRUDVVHWYRODWLOLW\VWLOOKDVWREHHVWLPDWHG7KHPRVW
FRPPRQDSSURDFKLVWRXVHWKHLQVWDQWDQHRXVVWDQGDUGGHYLDWLRQRIKLVWRULFFKDQJHVLQ
DVVHWYDOXHGHILQHGDV
n _2
∑ u i − u
δ = i =1
* τ ,
n −1
7KHVH EHLQJ YRODWLOLW\ GLYLGHQG \LHOG FXUUHQW SULFH RI WKH XQGHUO\LQJ DVVHW H[HUFLVH SULFH WLPH WR
PDWXULW\DQGULVNIUHHLQWHUHVWUDWH
)RU D PRGHO ZLWK VWRFKDVWLF LQYHVWPHQW FRVWV VHH %HUJHU 3 * 2IHN ( 6ZDU\ , ,QYHVWRU
9DOXDWLRQRIWKH$EDQGRQPHQW2SWLRQ-RXUQDORI)LQDQFLDO(FRQRPLFV9ROSS
$PUDP0.XODWLODND15HDO2SWLRQV²0DQDJLQJ6WUDWHJLF,QYHVWPHQWLQDQ8QFHUWDLQ:RUOG
+DUYDUG%XVLQHVV6FKROO3UHVV%RVWRQ0DVVDFKXVHWWVSS
)RULQVWDQFHWLPHVHULHVDQDO\VLVVXIIHUVIURPVLPLODUSLWIDOOV
)RUDQLQWURGXFWLRQRQ*$5&+DQG$5&+VHH&KDSWHUSSLQ3LQG\FN565XELQIHOG'/
$EDQGRQ7KH4XDUWHUO\5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
ZKHUH QLVWKHQXPEHURIKLVWRULFREVHUYDWLRQVRIDVVHWYDOXH
u i LVWKHQDWXUDOORJDULWKPRIWKHUHWXUQIURPDQREVHUYHGWUDGLQJSHULRG
_
u LVWKHPHDQRIWKH u i VDQG
τ LV D FRQYHUVLRQ FRHIILFLHQW WR FDOFXODWH YRODWLOLWLHV RYHU SHULRGV RI
GLIIHUHQWOHQJWKV
8VHIXOQHVVRIWKLVPHWKRGLVOLPLWHGKRZHYHUVLQFHKLVWRULFDOYDOXHVIRUWKHXQGHUO\LQJ
UHDO DVVHW DUH VHOGRP DYDLODEOH $ PRUH DSSOLFDEOH DSSURDFK LV WR HVWLPDWH SURMHFW
YRODWLOLW\IURPWKHVWRFNYDOXHV RI FRPSDQLHV ZKR RZQ WKH ULJKWV WR WKH SURMHFW XQGHU
VWXG\7KLVLVDYDOLGDSSURDFKZKHQWKHSURMHFWFORVHO\UHIOHFWVWKHJHQHUDOULVNLQHVVRI
RWKHUFRPSDQ\DFWLYLWLHV2QWKHRWKHUKDQGLIWKHSURMHFWGLYHUVLILHVFRPSDQ\DFWLYLWLHV
WRWRWDOO\QHZDUHDVVWRFNSULFHVRIRWKHUFRPSDQLHVDOUHDG\SUHVHQWLQWKDWVSHFLILFDUHD
FRXOG EH XVHG 7KH ODWWHU DSSURDFK KDV EHHQ DFFHSWHG LQ VRPH VWXGLHV $OVR LI
RSWLRQVRQWKHVHOLVWHGFRPSDQLHVDUHWUDGHGWKHLULPSOLHGYRODWLOLW\FRXOGEHFDOFXODWHG
$Q DOWHUQDWLYH HVWLPDWH RQ YRODWLOLW\ FDQ EH GHULYHG E\ LQWHUYLHZLQJ NQRZOHGJHDEOH
SHRSOHRQWKHSRVVLEOHVDOHVLQWKHWDUJHWPDUNHWRIWKHXQGHUO\LQJDVVHW7KHYRODWLOLW\LQ
WKH DVVHW YDOXH FDQ WKHQ EH FDOFXODWHG XVLQJ GHYLDWLRQV LQ WKH DFTXLUHG VDOHV HVWLPDWHV
+RZHYHU D SUREOHP RI WUDQVIRUPLQJ YRODWLOLW\ LQ VDOHV LQWR YRODWLOLW\ LQ DVVHW YDOXH
UHPDLQV 'DYLV WDFNOHV WKLV LVVXH DQDO\WLFDOO\ E\ OLQNLQJ VDOHV DQG DVVHW YDOXH
7KHHVWLPDWHVIRUGLYLGHQG\LHOGV DOVRQHHGFDVHVSHFLILFWDLORULQJ$VZHUHFDOOWKHVH
PHDQWKHUHWXUQVWKDWDFFUXHWRWKHKROGHURIWKHDVVHWLWVHOIEXWQRWWRWKHKROGHURIWKH
FDOO RSWLRQ,QSKDUPDFHXWLFDO5 'WKHVHFRXOGEHWKHYDOXHRIUHVHDUFK UHVXOWV WKDW
DUH QRW REWDLQHG GXH WR SURMHFW SRVWSRQHPHQW 2I FRXUVH VL]HDEOH GLYLGHQG \LHOGV
LQFUHDVH WKH LQFHQWLYH IRU HDUO\ H[HUFLVH VLQFH GLYLGHQGV GHFUHDVH WKH YDOXH RI WKH
XQGHUO\LQJDVVHW(VSHFLDOO\WKHELQRPLDOPRGHOLVZHOOVXLWHGWRKDQGOHERWKSURSRUWLRQDO
DQG XQSURSRUWLRQDO OHDNDJHV LQ SURMHFW YDOXH 0RUHRYHU ZKHUHDV WKH FRQWLQXRXVWLPH
PHWKRGV KDYH GLIILFXOWLHV LQ DGDSWLQJ WR UDQGRPO\ GLVWULEXWHG GLYLGHQGV WKHVH FDQ EH
)RULQVWDQFHLQSKDUPDFHXWLFDO5 'LIZHFRXOGGHULYHKLVWRULFDOSURMHFWYDOXHVZHZRXOGEHDEOHWR
FRPHXSZLWKDFXUUHQWSURMHFWYDOXHWRR,QRWKHUZRUGVWKHREMHFWLYHRIWKHWKHVLVZRXOGEHUHGXQGDQW
.DOOEHUJ*/DXULQ35HDO2SWLRQVLQ5 '&DSLWDO%XGJHWLQJ²$&DVH6WXG\DW3KDUPDFLD
8SMRKQ0DVWHU·V7KHVLV*RWKHQEXUJ6FKRRORI(FRQRPLFVDQG&RPPHUFLDO/DZ
0LFDOL]]L$7LPLQJWR,QYHVWDQG9DOXHRI0DQDJHULDO)OH[LELOLW\6FKHULQJ3ORXJK&DVH6WXG\
5HVHDUFK3DSHUSUHVHQWHGWKHUG$QQXDO5HDO2SWLRQV&RQIHUHQFH-XQH7KH1HWKHUODQGV
'DYLV*$(VWLPDWLQJ9RODWLOLW\DQG'LYLGHQG<LHOG:KHQ9DOXLQJ5HDO2SWLRQVWR,QYHVWRU
$EDQGRQ7KH4XDUWHUO\5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
1HZWRQ ' 3 3HDUVRQ $ : $SSOLFDWLRQ RI RSWLRQ SULFLQJ WKHRU\ WR 5 ' 5 '
0DQDJHPHQW9ROSS
$OVRUHIHUUHGWRDV´FRQYHQLHQFH\LHOGµVLQFHLQVRPHFDVHVHJFRPPRGLWLHVWKHKROGHURIWKHDVVHW
UHFHLYHVH[WUDYDOXHE\YLUWXHRIKROGLQJWKHDVVHW
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
LQFOXGHGLQWRELQRPLDO ODWWLFHV UHODWLYHO\ HDVLO\ 7KH QXPEHU RI QRGHV DQG SRVVLEOH HQG
VWDWHVLQFUHDVHVEXWWKHEDVLFORJLFUHPDLQVXQFKDQJHG
<HWDOWKRXJKFRPSXWDWLRQDODVSHFWVFRXOGEHKDQGOHGWKHHVWLPDWLRQRIDFRUUHFWYDOXH
IRU GLYLGHQG \LHOG HVSHFLDOO\ ZKHQ WKH XQGHUO\LQJ DVVHW LV UHDO UHPDLQV ,I WKH
RSSRUWXQLW\FRVWRIFDSLWDODQGWKHUHODWLYHUDWHRILQFUHDVHLQSURMHFWYDOXHWKHGULIWUDWH
FDQ EH FDOFXODWHG GLYLGHQG \LHOG LV VLPSO\ WKH GLIIHUHQFH EHWZHHQ WKHVH WZR 6RPH
UHVHDUFKHUV KDYH VLPSO\ VWDUWHG ZLWK DQ DUELWUDU\ ILJXUH DQG VWXGLHG WKH VHQVLWLYLW\ RI
RSWLRQ YDOXH WR FKDQJHV LQ WKLV ILJXUH 'DYLV SUHVHQWV DQ HODERUDWH WLPH
GHSHQGHQWIRUPXODIRUWKHYDOXHVRIGLYLGHQG\LHOGLQWKHFDVHRIDJROGPLQH
&ULWLTXHRI2SWLRQ7KHRUHWLF9DOXDWLRQ0HWKRGV
7KH VHHGV RI FULWLFLVP DUH SUHVHQW LQ WKH YDOXDWLRQ PHWKRGV LQWURGXFHG LQ SUHYLRXV
FKDSWHUV 7KH ILUVW GUDZEDFN LV WKH UHTXLUHG OHYHO RI PDWKHPDWLFV WR XQGHUVWDQG WKH
GHULYDWLRQRIYDOXDWLRQIRUPXODHDQGWRHVWLPDWHSDUDPHWHUYDOXHV4XDQWLWDWLYHDQDO\VHV
DPRQJ WKRVH RSWLRQ WKHRUHWLF YDOXDWLRQV DOZD\V LQFOXGH VLPSOLILFDWLRQV IURP UHDOLW\
ZKLFK PDNHV LW FRPSHOOLQJ WKDW WKH IORZ RI FDOFXODWLRQV UHPDLQV WUDFWDEOH 'HFLVLRQ
PDNHUV· WUXVW RQ PDWKHPDWLFDO PHWKRGV VXIIHUV D JUHDW GHDO LI XQGHUVWDQGLQJ LV ORVW
7UDQVSDUHQF\LVHYHQPRUHLPSRUWDQWLIWKHLPSOLFDWLRQVWXUQRXWWREHFRXQWHULQWXLWLYH
139 FDOFXODWLRQV XVH D VLPLODU ORJLF LQ WKHLU HVWLPDWLRQ RI DQ DSSURSULDWH RSSRUWXQLW\
FRVWRIFDSLWDO
$QRWKHUFRQFHUQLVWKHHVWLPDWLRQRISDUDPHWHUYDOXHV(VSHFLDOO\ZKHQWKHXQGHUO\LQJ
DVVHWLVQRQWUDGHGYRODWLOLW\GLYLGHQG\LHOGDQGFXUUHQWDVVHWYDOXHDUHUHODWLYHO\GLIILFXOW
WRHVWLPDWH,IWKHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLVHVWLPDWHGE\FDOFXODWLQJD139
RIHVWLPDWHGVDOHVWKHDQDO\VLVVXIIHUVIURPFLUFXODULW\DOWKRXJKWKHJRDOLVWRLPSURYHWKH
DFFXUDF\ RI YDOXDWLRQ RQH RI WKH NH\ SDUDPHWHU HVWLPDWRUV LV EDVHG RQ WKH WUDGLWLRQDO
PHWKRGV0RUHRYHUWKH139HVWLPDWHVEHFRPHPRUHXQUHOLDEOHDVWKHWLPHKRUL]RQIRU
VDOHVHVWLPDWHVVSDQVIDUWKHULQWRWKHIXWXUH
)XUWKHUPRUHWKHDVVXPSWLRQVRQSDUDPHWHUYDOXHVWRUHPDLQFRQVWDQWWKURXJKSURMHFW
OLIH GHYLDWHIURPUHDOLW\7KHORQJWLPHKRUL]RQLQSKDUPDFHXWLFDO5 ' VPRRWKV WKHVH
GHYLDWLRQV WKRXJK ZKLFK LPSURYHV WKH UHOLDELOLW\ RI WKH DQDO\VLV LQ WKLV FRQWH[W
+RZHYHULQPDQ\VLWXDWLRQVWKHUHDOOLPLWDWLRQLVQRWWKHORJLFEHKLQGWKHIUDPHZRUNEXW
WKHODFNRINQRZOHGJHWKDWZHKDYHRQSDUDPHWHUYDOXHV
'DYLV*$(VWLPDWLPJ9RODWLOLW\DQG'LYLGHQG<LHOG:KHQ9DOXLQJ5HDO2SWLRQVWR,QYHVWRU
$EDQGRQ7KH4XDUWHUO\5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
$PUDP0.XODWLODND1'LVFLSOLQHG'HFLVLRQV$OLJQLQJ'HFLVLRQV:LWKWKH)LQDQFLDO0DUNHWV
+DUYDUG%XVLQHVV5HYLHZ-DQXDU\)HEUXDU\SS
/XHKUPDQ 7 $ ,QYHVWPHQW 2SSRUWXQLWLHV DV 5HDO 2SWLRQV *HWWLQJ 6WDUWHG RQ WKH 1XPEHUV
6RPH OLPLWDWLRQV DUH LPSOLHG E\ WKH VWUXFWXUH RI WKH IRUPXODWHG IUDPHZRUN LWVHOI
2SWLRQWKHRUHWLF YDOXDWLRQ WRROV ZRUN EHVW ZLWK RQO\ RQH VRXUFH RI XQFHUWDLQW\ LQ WKH
XQGHUO\LQJ DVVHW YDOXH 7KH FDOFXODWLRQV EHFRPH FRPSOH[ LI PXOWLSOH FDXVHV IRU
XQFHUWDLQW\ DUH PRGHOHG DV GLIIXVLRQ SURFHVVHV VLPXOWDQHRXVO\ <HW WKH LQWHUSOD\ RI
GLIIHUHQW FDXVHV IRU ULVN DQG XQFHUWDLQW\ LV DQ HVVHQWLDO FKDUDFWHULVWLF RI IRU H[DPSOH
SKDUPDFHXWLFDO5 'DFWLYLWLHV,QRWKHUZRUGVGLIIXVLRQSURFHVVHVPD\QRWEHWKHEHVW
WRROVWRPRGHORUVROYHSUREOHPVZLWKDFRPSOLFDWHGVWUXFWXUHRIXQFHUWDLQWLHV+RZHYHU
WKHLGHQWLILFDWLRQRIDWUDGHGDQGKLJKO\FRUUHODWHGWZLQDVVHWDOOHYLDWHVWKLVSUREOHPWR
VRPHH[WHQW
/DVWO\WKHRSWLRQWKHRUHWLFDSSURDFKLVEHVWVXLWHGIRUSUREOHPVZKHUHWKHUHLVRQO\RQH
RSWLRQ PRGHOHG DQG YDOXHG DW D WLPH *HQHUDOO\ VHSDUDWH UHDO RSWLRQ YDOXHV DUH QRW
DGGLWLYH DQG LQWHUDFWLRQV EHWZHHQ WZR RSWLRQ YDOXHV FDQ EH SRVLWLYH DV ZHOO DV
QHJDWLYH 7KLV PHDQV WKDW PRVW UHOLDEOH PRGHOV DUH REWDLQHG ZKHQ RQO\ WKH PRVW
LPSRUWDQWUHDORSWLRQVHPEHGGHGLQWKHSURMHFWDUHLQFOXGHGLQWKHPRGHODQGYDOXHG
,Q FRQFOXVLRQ DOWKRXJK WKH RSWLRQV DSSURDFK WR YDOXDWLRQ LV WKHRUHWLFDOO\ DSSHDOLQJ
DSSO\LQJLWLQUHDOZRUOGSUREOHPVLVQRWHDV\0RUHRYHUGXHWRLWVLQKHUHQWFRPSOH[LW\
LWLVE\QRPHDQVWKHPRVWVXLWDEOHDSSURDFKWRDOOYDOXDWLRQSUREOHPV7KHH[LVWHQFHRI
UHDORSWLRQVLQDQLQYHVWPHQWRSSRUWXQLW\GRHVQRWDXWRPDWLFDOO\LPSO\QRUZDUUDQWWKH
XVH RI RSWLRQV DSSURDFK WR YDOXDWLRQ 7KHUHIRUH LW LV LPSRUWDQW WR VHSDUDWH WKH ORJLF
EHKLQG WKH LGHQWLILFDWLRQ RI UHDO RSWLRQV DQG WKH RSWLRQ WKHRUHWLF YDOXDWLRQ DSSURDFK
IURP HDFK RWKHU ,Q PDQ\ FDVHV WKH VLPSOH DQG LQWXLWLYH WUDGLWLRQDO PHWKRGV SURYLGH
UHTXLUHGDFFXUDF\IRUOHJLWLPDWHGHFLVLRQPDNLQJ
&RPSDULVRQ%HWZHHQ'LIIHUHQW$SSURDFKHV
7KLV VHFWLRQ SUHVHQWV YLHZSRLQWV RQ WKH KROLVWLF WUHDWPHQW RI SURMHFW HYDOXDWLRQ LQ WKH
FRQWH[W RI ORQJ PXOWLVWDJHG LQYHVWPHQW RSSRUWXQLWLHV VXFK DV GUXJ GHYHORSPHQW
SURMHFWV7KHLGHDLVWRFRPSDUHWKHSURVDQGFRQVRIGLIIHUHQWRSWLRQWKHRUHWLFPHWKRGV
DQGWRFRQWUDVWWKHPZLWKWKHVWUHQJWKVDQGZHDNQHVVHVRIWUDGLWLRQDOYDOXDWLRQPHWKRGV
6RPH LGHDV DUH DOVR SUHVHQWHG RQ ZKLFK WRROV ZRXOG EH PRVW VXLWDEOH IRU HYDOXDWLQJ
SURMHFWVDWGLIIHUHQWSKDVHVRIGHYHORSPHQW
7KH$PRXQWRI8QFHUWDLQW\)DFLQJWKH$QDO\VW
7KH VHTXHQFLQJ RI GHFLVLRQV DQG WKHLU FRQVHTXHQFHV KDYH LPSRUWDQW HIIHFWV RQ WKH
LQYHVWPHQWGHFLVLRQ :KHQLQYHVWPHQWVFDQEHPDGHLQFUHPHQWDOO\WKHYDOXHRIWRWDO
9DOXLQJ 5HDO 2SWLRQV 7KH 4XDUWHUO\ 5HYLHZ RI (FRQRPLFV DQG )LQDQFH9RO 6SHFLDO ,VVXH 2Q 5HDO
2SWLRQVSS
7ULJHRUJLV / 5HDO 2SWLRQV 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH $OORFDWLRQ 0,7
3UHVVSS
%DU,ODQ$6WUDQJH:&$0RGHORI6HTXHQWLDO,QYHVWPHQW-RXUQDORI(FRQRPLF'\QDPLFV
DQG&RQWURO9ROSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²'HILQLWLRQRI5HDO2SWLRQV
EHFRPH XVHIXO ZKHQ DVVHVVLQJ ODWHUVWDJH 5 ' LQYHVWPHQWV :KHQ HQWHULQJ SKDVH ,,,
DQGSKDVH,9PRVWRIWKHSURGXFWFKDUDFWHULVWLFVDUHDOUHDG\IL[HGDQGWKHXQFHUWDLQWLHV
LQ WKH PDUNHW VXFFHVV RI WKH ILQDO SURGXFW KDYH GHFUHDVHG :KHQ WKH WLPH WR PDUNHW
ODXQFK FRPHV FORVHU WRWDO XQFHUWDLQW\ GLPLQLVKHV VR WKDW WKH WUDGLWLRQDO WRROV SURYLGH
PRUH FRUUHFW HVWLPDWHV RQ SURMHFW YDOXH ,Q IDFW LI QR XQFHUWDLQW\ LQ WKH XQGHUO\LQJ
SDUDPHWHU YDOXHV LV SUHVHQW UHVXOWV IURP 139EDVHG PHWKRGV DQG RSWLRQWKHRUHWLF
PHWKRGVFRQYHUJH ,QHVVHQFHWKHPRVWVXLWDEOHYDOXDWLRQWRROLVODUJHO\GHWHUPLQHGE\
WKH DPRXQW RI WRWDO XQFHUWDLQW\ IDFLQJ WKH DQDO\VW $W DQ HDUO\ VWDJH RSWLRQWKHRUHWLF
PHWKRGV DUH SUHIHUUHG GXH WR WKHLU FRQVLVWHQW WUHDWPHQW RI PDQDJHULDO IOH[LELOLW\ DQG
SURMHFW ULVN ZKHUHDV WUDGLWLRQDO PHWKRGV DUH PRUH VXLWDEOH DW ODWHU VWDJHV GXH WR WKHLU
VLPSOLFLW\DQGWUDFWDELOLW\7KHFKRLFHRIWKHVXLWDEOHYDOXDWLRQWRROUHODWLYHWRWKHDPRXQW
RIWRWDOXQFHUWDLQW\LVLOOXVWUDWHGLQ)LJXUHEHORZ
'(&5($6,1*/(9(/2)727$/81&(57$,17<$1'&203/(;,7<,17+($1$/<6,6
1
2
?
3
'
7 7HFKQRORJ\
( , $QDORJLHVDQG3DWWHUQ 'HFLVLRQ7UHHV 'HFLVLRQ7UHHV 5HDO2SWLRQ
7 . )RUHFDVWLQJ
6 5HFRJQLWLRQ 6FHQDULR3ODQQLQJ 9DOXDWLRQ
/
( 5HDO2SWLRQ
2 5HDO2SWLRQ
*
2 5RXJK0DUNHW 5HDO2SWLRQ 9DOXDWLRQ 1HW3UHVHQW9DOXH
* 9DOXDWLRQ
7
8 3RWHQWLDO(VWLPDWLRQ 9DOXDWLRQ
6 'LVFRXQWHG&DVK 'LVFRXQWHG&DVK
6DQLW\&KHFNV 7DLORU0DGH
*DPH7KHRU\ )ORZ%DVHG )ORZ%DVHG
6LPXODWLRQV
0HWKRGV 0HWKRGV
'LVFRYHU\ 0DUNHW/DXQFK
3KDVH,6WXGLHV 3KDVH,,6WXGLHV 3KDVH,,,6WXGLHV
3UHFOLQLFDO6WXGLHV 3KDVH,96WXGLHV
)LJXUH7KHVXLWDEOHYDOXDWLRQWRRODWHDFKVWDJHRIDSKDUPDFHXWLFDO5 'SURMHFWGHWHUPLQHGE\WKH
WRWDOOHYHORIXQFHUWDLQW\DWHDFKSURMHFWSKDVH
1RDQDO\WLFDOWRROFDQEHYHU\DFFXUDWHLQWKHHDUO\VWDJHVRI5 'DFWLYLWLHV+RZHYHU
RQFHWKHHDUO\VWXGLHVKDYHEHHQVXFFHVVIXOO\SHUIRUPHGUHDORSWLRQVPHWKRGRORJ\KHOSV
FKRRVHWKHPRVWSURPLVLQJSURMHFWVIRUFRQWLQXDWLRQ,QWKHPLGGOHVWDJHVRIWKH5 '
OLIHF\FOHFRVWVLQFUHDVHUDSLGO\ZKLOHVHYHUDOIXWXUHGLUHFWLRQVDUHVWLOORSHQDQGPDQ\UHDO
RSWLRQV UHPDLQ YDOXDEOH ,W LV KHUH WKDW D VRXQG SURMHFW HYDOXDWLRQ WRRO LV QHHGHG DQG
ZKHUH WKH UHDO RSWLRQ YDOXDWLRQ LV PRVW XVHIXO 7KH ILQDO SKDVHV RI 5 ' DUH JHQHUDOO\
PRUHSUHGLFWDEOHZKLFKMXVWLILHVWKHXVHRIWUDGLWLRQDOFDSLWDOEXGJHWLQJPHWKRGV
7KHLGHDRIDGMXVWLQJSURMHFWHYDOXDWLRQWRROVDFFRUGLQJWRWKHOHYHORISUHYDLOLQJ
XQFHUWDLQW\KDVDFKLHYHGZLGHVSUHDGDWWHQWLRQDPRQJFRUSRUDWHSUDFWLWLRQHUVDFURVV
5RVV68VHV$EXVHVDQG$OWHUQDWLYHVWRWKH1HW3UHVHQW9DOXH5XOH )LQDQFLDO 0DQDJHPHQW
9RO1RSS
7KH DXWKRU DGDSWHG IURP &RXUWQH\ + .LUNODQG - 9LJXHULH 3 6WUDWHJ\ 8QGHU 8QFHUWDLQW\
+DUYDUG%XVLQHVV5HYLHZ1RYHPEHU'HFHPEHUSS
LQGXVWULHV
&R\QH.36XEUDPDQLDP6%ULQJLQJ'LVFLSOLQHWR6WUDWHJ\7KH0F.LQVH\4XDUWHUO\1XPEHU
SS 2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$6\QWKHVLV
,'(17,),&$7,212)5($/237,216,1
3+$50$&(87,&$/5 '
,QWKHSUHFHGLQJFKDSWHUWKHPHWKRGRORJ\RIUHDORSWLRQVZDVLQWURGXFHG5HOHYDQWUHDO
RSWLRQVZHUHLGHQWLILHGDQGDQDO\WLFDOYDOXDWLRQWRROVZHUHSUHVHQWHG)LQDOO\WKHFKRLFH
RIWKHPRVWDSSURSULDWHSURMHFWHYDOXDWLRQWRROVLQWKHSUHVHQFHRIDYDU\LQJOHYHORIWRWDO
XQFHUWDLQW\ZDVDGGUHVVHG
/LWWOH ZDV VDLG DERXW ZKLFK PHWKRG WR DSSO\ LQ WKH YDOXDWLRQ RI UHDO RSWLRQV 7KLV
FKDSWHUVXPPDUL]HVWKHLGHDVRI&KDSWHUVDQGDQGPDWFKHVYDOXDWLRQPHWKRGVWRWKH
UHOHYDQW UHDO RSWLRQV LGHQWLILHG LQ &KDSWHU 7KLV HQDEOHV XV WR SUHVHQW D XQLI\LQJ
PRGHORQWKHUHFRJQLWLRQRIUHDORSWLRQVLQSURMHFWHYDOXDWLRQLQSKDUPDFHXWLFDO5 '
7KHSUDFWLFDELOLW\RIWKHJHQHUDWHGPRGHOZLOOEHDVVHVVHGDQGYDOLGDWHGE\DSSO\LQJLWWR
DFDVHVWXG\RIWKHQH[WFKDSWHU7KXVWKLVFKDSWHUVHUYHVDVDEULGJHEHWZHHQWKHWKHRU\
DQGWKHSUDFWLFHWRIROORZ
0DSSLQJ5HOHYDQW2SWLRQVZLWK9DOXDWLRQ0HWKRGRORJ\
7KHYDOXDWLRQRIUHDORSWLRQVLQSUDFWLFHFDQEHFRQGXFWHGTXDQWLWDWLYHO\RUTXDOLWDWLYHO\
7KLVVHFWLRQFRQFHQWUDWHVRQTXDQWLWDWLYHRSWLRQYDOXDWLRQRQO\
7KH2SWLRQWR$EDQGRQ
7KHRSWLRQWRDEDQGRQLVSUHVHQWDWHYHU\VWDJHRIDSKDUPDFHXWLFDO5 'SURMHFWGXHWR
WKHLQFUHPHQWDOVWUXFWXUHRILQYHVWPHQWV7KHUHIRUHWKHWDVNLVWRYDOXHDQ$PHULFDQSXW
RSWLRQ WKDW LQFUHDVHV WKH WRWDO YDOXH RI D SURMHFW $V WKH WUDGLWLRQDO PHWKRGV RPLW WKH
HIIHFWRIWKHFKDQJLQJOHYHORIWRWDOULVNDQLPSURYHGDSSURDFKLVWRXWLOLVHRQHRIWKH
RSWLRQ WKHRUHWLF YDOXDWLRQ PHWKRGV 0RUH VSHFLILFDOO\ HLWKHU WKH FRQWLQXRXVWLPH
FRQWLQJHQWFODLPVPHWKRGRULWVGLVFUHWLVHGDSSUR[LPDWLRQWKHELQRPLDOODWWLFHVKRXOGEH
LPSOHPHQWHG 7KH PHWKRG RI VWRFKDVWLF G\QDPLF SURJUDPPLQJ LV XQVXLWDEOH LQ WKLV
FRQWH[WVLQFHLWDVVXPHVWKHWRWDOOHYHORIULVNWREHH[RJHQRXVDQGFRQVWDQWWKURXJKWKH
OLIHRIWKHSURMHFW
7KH XVH RI FRQWLQJHQW FODLPV DQDO\VLV LQ FRQWLQXRXV WLPH ZRXOG UHVXOW LQ D FRPSOH[
V\VWHP RI SDUWLDO GLIIHUHQWLDO HTXDWLRQV ,Q SUDFWLFH ZH ZRXOG KDYH WR UHVRUW WR D
QXPHULFDOPHWKRGHJILQLWHGLIIHUHQFHDSSUR[LPDWLRQLQRUGHUWRGHULYHDYDOXHIRUWKH
SURMHFW ,QVWHDG WKH YDOXH RI WKH $PHULFDQ RSWLRQ WR DEDQGRQ FDQ EH PRGHOHG LQ D
ELQRPLDOODWWLFHZKLOHWKHORJLFEHKLQGWKHFDOFXODWLRQVVWLOOUHPDLQVWUDFWDEOH7KHUHIRUH
WKH VXJJHVWHGDSSURDFKWRYDOXHWKHRSWLRQWRDEDQGRQLVWRDSSO\WKHELQRPLDOODWWLFH
PHWKRG
7KH*URZWK2SWLRQ
7KH YDOXDWLRQ RI JURZWK RSWLRQV LV PRUH LQWULFDWH 7KH PRVW FKDOOHQJLQJ WDVN LV WR
LGHQWLI\ WKH PRVW YDOXDEOH JURZWK RSWLRQV HPEHGGHG LQ DQ LQYHVWPHQW RSSRUWXQLW\
*URZWKRSWLRQVDUHFDVHVSHFLILF DQG FDQ EH SURDFWLYHO\ GHVLJQHG DQG FUHDWHG LQWR WKH
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$6\QWKHVLV
LQYHVWPHQW E\ WKH GHFLVLRQPDNHUV $OVR WKHLU FKDUDFWHULVWLFV RIWHQ UHPDLQ YDJXH ,W LV
QRWHYLGHQWZKHQDSODQQHGJURZWKRSWLRQEHFRPHVDYDLODEOHWRWKHLQLWLDORSWLRQKROGHU
ZKLFKUHVXOWVLQLQH[DFWHVWLPDWLRQVRIWKHWLPHWRPDWXULW\+RZHYHUDVJURZWKRSWLRQV
FDQ EH H[HUFLVHG RQO\ DV VRRQ DV WKH\ EHFRPH DYDLODEOH WKH\ FDQ EH FRQVLGHUHG
(XURSHDQ ZKLFK HDVHV WKHLU DQDO\WLFDO YDOXDWLRQ ,Q IDFW WKH PHWKRG RI FRQWLQXRXV
FRQWLQJHQW FODLPV LV MXVW DV DSSOLFDEOH DV WKH PHWKRG RI ELQRPLDO ODWWLFH ([LVWLQJ
VROXWLRQV WR VWDQGDUG VHWV RI WKH UHVXOWLQJ SDUWLDO GLIIHUHQWLDO HTXDWLRQV FDQ EH XWLOLVHG
7KH WUDGLWLRQDO YDOXDWLRQ WRROV DQG WKH PHWKRG RI VWRFKDVWLF G\QDPLF SURJUDPPLQJ
UHPDLQWKHRUHWLFDOO\LQIHULRUGXHWRWKHLUDVVXPSWLRQVRQFRQVWDQWSURMHFWULVN,QVKRUW
WKHVXJJHVWHGPHWKRGLVHLWKHURQHRIWKHFRQWLQJHQWFODLPVPHWKRGVGHSHQGLQJRQWKH
VSHFLILF FKDUDFWHULVWLFV RI WKH JURZWK RSWLRQ 7KH ELQRPLDO ODWWLFH FDQ WDNH PRUH
FRPSOLFDWHG RSWLRQ IHDWXUHV DV LQSXW ZKHUHDV WKH FRQWLQXRXV FDVH SURYLGHV D PRUH
DFFXUDWHYDOXHIRUWKHRSWLRQ
%DVHGRQOLWHUDWXUHVWXG\DQGH[SHUWLQWHUYLHZVZHFRQFOXGHWKDWWKHUHDORSWLRQVZKLFK
LQIOXHQFH WKH WRWDO YDOXH RI D SURMHFW PRVW DUH RSWLRQ WR DEDQGRQ DQG JURZWK
RSWLRQVHPEHGGHGLQDQ5 'SURMHFW7KH\RFFXUDWGLIIHUHQWVWDJHVRIGHYHORSPHQWDV
LOOXVWUDWHGLQ)LJXUHEHORZ
GROWTH OPTION
/DXQFK
3KDVH,
<($56
OPTION TO ABANDON
)LJXUH7KHRFFXUHQFHRIUHOHYDQWUHDORSWLRQVLQDSKDUPDFHXWLFDO5 'SURMHFW
7KHZLGWKRIDUURZVLQ)LJXUHUHSUHVHQWVWKHHVWLPDWHGVKDUHRIRSWLRQYDOXHIURPWKH
7KHZLGWKVRIDUURZVUHSUHVHQWLQJWKHYDOXHRIUHDORSWLRQVDUHK\SRWKHWLFDODQGUHSUHVHQWRQHRIWKH
UHVXOWVIURPWKHOLWHUDWXUHVWXG\RIFKDSWHUV
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$6\QWKHVLV
WRWDOYDOXHRIDSURMHFW7KHDEDQGRQPHQWRSWLRQVWKDWDULVHEHIRUHSKDVH,,DQG,,,²
UHSUHVHQWLQJ SHDNV LQ 5 ' H[SHQGLWXUH DUH SDUWLFXODUO\ YDOXDEOH VLQFH WKH\ SUHYHQW
UHJUHW 7KH LPSRUWDQFH RI JURZWK RSWLRQV GHFUHDVHV DV GHYHORSPHQW SURFHHGV XQWLO
PDUNHWLQWURGXFWLRQJHQHUDWHVIXUWKHUJURZWKRSSRUWXQLWLHVIRUSURGXFWOLQHH[WHQVLRQV
)LJXUHLVVW\OL]HGLQWKHVHQVHWKDWUHDORSWLRQVDUHDVVXPHGWRH[LVWRQO\DWWUDQVLWLRQ
SRLQWV IURP RQH GHYHORSPHQW SKDVH WR DQRWKHU ,Q UHDOLW\ JURZWK RSWLRQV DQG WKH
DEDQGRQPHQWRSWLRQDUHDYDLODEOHWRGHFLVLRQPDNHUVDOOWKHWLPH
,PSOLFDWLRQVRI2SWLRQ([HUFLVH
7KHUROHRIJURZWKRSWLRQVFDQEHLOOXVWUDWHGE\GHVFULELQJWKHPDVSURYLGLQJDGGLWLRQDO
¶SRVLWLRQLQJ YDOXH· ZKHQ D OLQN LQ WKH FKDLQ RI LQWHUUHODWHG 5 ' LQYHVWPHQWV LV
H[HUFLVHG 5 'LQYHVWPHQWVSRVLWLRQWKHFRPSDQ\WRZDUGVDFHUWDLQWKHUDSHXWLFDUHD
DQGHTXLSWKHFRPSDQ\ZLWKJURZWKRSSRUWXQLWLHVZKRVHSRWHQWLDOLVFRQGLWLRQDORQWKH
IXWXUH HYROYHPHQW RI WKH WKHUDSHXWLF DUHD 4XLWH QDWXUDOO\ GLIIHUHQW SXUSRVHV LQ
LQYHVWPHQW VSHQGLQJ ZDUUDQW GLIIHUHQW WRROV IRU WKHLU MXVWLILFDWLRQ 7KH UDWLRQDOH LV
GHSLFWHGLQ)LJXUHEHORZ
.12:/('*(
%8,/',1*
326,7,21,1*
81&(57$,17<
,19(670(176,1
23(5$7,216
&200,70(176
)LJXUH3URJUHVVLRQRILQYHVWPHQWIRFXVLQSKDUPDFHXWLFDO5 '
,PSDFWRQ'HFLVLRQ0DNLQJ
$PUDP0.XODWLODND15HDO2SWLRQV²0DQDJLQJ6WUDWHJLF,QYHVWPHQWLQDQ8QFHUWDLQ:RUOG
+DUYDUG%XVLQHVV6FKROO3UHVV%RVWRQ0DVVDFKXVHWWVSS
)DXONQHU 7 : $SSO\LQJ ¶2SWLRQV 7KLQNLQJ· WR 5 ' 9DOXDWLRQ 5HVHDUFK
7HFKQRORJ\
0DQDJHPHQW0D\-XQHSS
0LWFKHOO*5+DPLOWRQ:)0DQDJLQJ5 'DVD6WUDWHJLF2SWLRQ5HVHDUFK
7HFKQRORJ\
0DQDJHPHQW0D\-XQHSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$6\QWKHVLV
7KH WUDGLWLRQDO SURMHFW HYDOXDWLRQ WRROV RPLW WKH YDOXH RI UHDO RSWLRQV HPEHGGHG LQ D
SURMHFW ,Q FRQVHTXHQFH WKH\ XQGHUYDOXH SURMHFWV ZLWK RSWLRQOLNH FKDUDFWHULVWLFV VXFK DV HDUO\VWDJH
5 'LQYHVWPHQWV7KLVXQGHUYDOXDWLRQLVLOOXVWUDWHGLQ)LJXUHDERYHZKHUHWKHZLGHVW
DUURZVLQWKHHDUO\GHYHORSPHQWVWDJHUHSUHVHQWODUJHVWYDOXHIRUWKHUHDORSWLRQV7KXV
ZLWKRXW LQFOXGLQJ WKH YDOXH RI JURZWK RSWLRQV DQG DEDQGRQPHQW RSWLRQV LQ SURMHFW
YDOXHSURILWDEOHLQYHVWPHQWRSSRUWXQLWLHVFRXOGEHUHMHFWHG,QPDQ\FDVHVWKH\FDQWLS
WKHEDODQFHEHWZHHQSURMHFWDFFHSWDQFHDQGUHMHFWLRQ
,Q YLHZ RI WKH DERYH LW LV HDV\ WR H[SODLQ ZK\ HFRQRPLF GHFLVLRQ FULWHULD DUH OHVV
HPSKDVL]HG UHODWLYH WR DOWHUQDWLYH GHFLVLRQ FULWHULD DW WKH HDUO\ VWDJHV RI WKH 5 ' OLIH
F\FOH 'HFLVLRQPDNHUVPD\UHDOLVHWKHYDOXHRIKLGGHQUHDORSWLRQVLQWXLWLYHO\EXWGR
QRW WUXVW LQ HFRQRPLF DQDO\VHV VLQFH E\ XVLQJ WKH WUDGLWLRQDO YDOXDWLRQ PHWKRGV WKH
DQDO\VHVPD\VXJJHVWSURMHFWDEDQGRQPHQW$FNQRZOHGJLQJDQGTXDQWLI\LQJWKHYDOXHRI
UHDORSWLRQVDOLJQVIDFWVZLWKLQWXLWLRQDQGWKXVEULQJVGLVFLSOLQHLQWRGHFLVLRQPDNLQJ
,PSDFWRQ3URMHFW3RUWIROLR6HOHFWLRQ
$FRQVHTXHQFHRILQFOXGLQJWKHYDOXHRIUHDORSWLRQVLQWKHWRWDOYDOXHRIDSURMHFWLVWKDW
PRUHHDUO\VWDJHSURMHFWVVHHPSURILWDEOHDQGDUHLQLWLDOLVHG+RZHYHUPRUHSURMHFWVDUH
DOVR NLOOHGDQGDEDQGRQHGGXULQJODWHUVWDJHVRIWKHGHYHORSPHQWVLQFH LW LV RSWLPDO WR
OHDYH VRPH JURZWK RSSRUWXQLWLHV XQH[HUFLVHG $V D UHVXOW WKH WRWDO QXPEHU RI DFWLYH
SURMHFWVLQSRUWIROLRUHPDLQVWKHVDPHDVEHIRUHRQDYHUDJH+RZHYHUWKHPHDQWLPHRI
NHHSLQJ D SURMHFW LQ WKH SRUWIROLR IDOOV DV PRUH SURMHFWV DUH LQLWLDOLVHG DQG DEDQGRQHG
VLPXOWDQHRXVO\7KHODWWHUSUDFWLFDOLPSOLFDWLRQPD\EHVRPHZKDWSUREOHPDWLFHVSHFLDOO\
LQSKDUPDFHXWLFDO5 ''LIILFXOWLHVDULVHDVSURMHFWVSURJUHVVDQGJHQHUDWHDQLQHUWLDRI
WKHLU RZQ $V D UHVXOW UHVLVWDQFH WR DEDQGRQ D FHUWDLQ SURMHFW PD\ VXUIDFH DOWKRXJK
HFRQRPLFIDFWRUVFDOOIRULPPHGLDWHSURMHFWWHUPLQDWLRQ,QRUGHUWREHPRVWHIIHFWLYH
LPSOHPHQWDWLRQ RI WKH UHDO RSWLRQV PHWKRGRORJ\ LQ SRUWIROLR PDQDJHPHQW UHTXLUHV
RUJDQLVDWLRQDOFDSDELOLWLHVWRDFWGHFLVLYHO\DFFRUGLQJWRWKHLPSOLFDWLRQVVXJJHVWHGE\WKH
WKHRU\
$QRWKHUYLHZSRLQWRQSRUWIROLRVHOHFWLRQFRPHVIURPWKHDSSOLFDELOLW\DQGWKHLPSDFWRI
LGHQWLILHG UHDO RSWLRQV RQ PXOWLSOH SURGXFWV DQG WKHUDSHXWLF DUHDV VLPXOWDQHRXVO\ )RU
LQVWDQFH WKH JURZWK RSSRUWXQLWLHV SURYLGHG E\ DQ LQYHVWPHQW VKRXOG LQFOXGH WKH
SRVVLEOH VSLOORYHU HIIHFWV IURP WKH WDUJHW SURGXFW WR UHODWHG SURGXFWV LQ WKH VDPH
WKHUDSHXWLF DUHD 8VXDOO\ D YDOXDEOH JURZWK RSSRUWXQLW\ FDQ EH H[SORLWHG LQ DOO UHODWHG
SURGXFWVWKHUHE\LQFUHDVLQJWKHLQLWLDOYDOXHRIWKHJURZWKRSWLRQ%\DQDORJ\WKHHIIHFW
RI SURMHFW DEDQGRQPHQW RQ RWKHU SURGXFWV LQ UHODWHG WKHUDSHXWLF DUHDV KDV WR EH
FRQVLGHUHG ZKHQ PDNLQJ WKH DEDQGRQHPHQW GHFLVLRQ ,I WKH WHUPLQDWLRQ RI D SURMHFW
DIIHFWVDGYHUVHO\WKHIXWXUHSURVSHFWVRIUHODWHGSURMHFWVWKHWKUHVKROGWRDEDQGRQWKDW
VSHFLILFSURMHFWLQFUHDVHV
.XODWLODND13HURWWL(3URMHFW9DOXDWLRQ8QGHU8QFHUWDLQW\:KHQ'RHV'&))DLO"-RXUQDORI
$SSOLHG&RUSRUDWH)LQDQFH:LQWHUSS
6HH)LJXUHRQSS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
$33/,&$7,2172$&$6(678'<
,QWKLVFKDSWHUZHLGHQWLI\DQGYDOXHWKHUHDORSWLRQVHPEHGGHGLQDUHDOSKDUPDFHXWLFDO
5 'SURMHFWTXDQWLWDWLYHO\$FRPSDULVRQZLWKWKHUHVXOWVIURPWKHWUDGLWLRQDOYDOXDWLRQ
PHWKRGVLVDOVRSUHVHQWHG)XUWKHUPRUHWKHSUDFWLFDOLPSOLFDWLRQVRILQWURGXFLQJWKHUHDO
RSWLRQYDOXDWLRQLQSURMHFWPDQDJHPHQWDUHGLVFXVVHG
&DVH&RPSDQ\'HVFULSWLRQ
2ULRQ 3KDUPD SDUW RI 2ULRQ &RUSRUDWLRQ LV WKH ODUJHVW SKDUPDFHXWLFDO FRPSDQ\ LQ
)LQODQGZLWKDQDQQXDOWXUQRYHURI%),0 7KHFRPSDQ\GHYHORSVPDQXIDFWXUHV
DQGPDUNHWVKXPDQGUXJVDQGYHWHULQDU\SURGXFWVLQIRXUWKHUDSHXWLFDUHDV,QWKHSDVW
WKH FRPSDQ\ JHQHUDWHG PRVW RI LWV UHYHQXHV E\ PDQXIDFWXULQJ DQG VHOOLQJ JHQHULF
SURGXFWVLQ)LQODQGDQGKDGOLWWOHSURSULHWDU\5 'DFWLYLWLHV7KDQNVWRLWVVWURQJEUDQG
DQG PDUNHW SRVLWLRQ WKH FDVKIORZV KDYH UHPDLQHG VWDEOH 'HVSLWH WKH UHODWLYHO\ VPDOO
FRPSDQ\ VL]H 2ULRQ 3KDUPD FRYHUV DOO SDUWV RI WKH YDOXH FKDLQ IURP PROHFXOH
GLVFRYHU\ WR PDUNHWLQJ SKDVH RI DSSURYHG GUXJV ,Q XQLILHG (XURSHDQ PDUNHWV WKH
PDUNHWLQJ DXWKRUL]DWLRQ SROLFLHV FRQWULEXWH WR WKH JOREDOLVDWLRQ RI SKDUPDFHXWLFDO
PDUNHWV DQG VLPXOWDQHRXVO\ LQWHQVLI\ FRPSHWLWLRQ )XUWKHUPRUH GRPHVWLF PDUNHWV GR
QRW VXSSRUW DQ 5 ' LQWHQVLYH SKDUPDFHXWLFDO FRPSDQ\ DLPLQJ DW SURSULHWDU\ SURGXFW
GHYHORSPHQW HFRQRPLFDOO\ ,Q WKLV DUHQD 2ULRQ 3KDUPD·V YLVLRQ LV WR EHFRPH PRUH
LQWHUQDWLRQDOWKURXJKRZQVXEVLGLDU\DQGSDUWQHUQHWZRUNDQGWREHFRPHDSOD\HULQWKH
VHOHFWHGPDUNHWVDQGWKHUDSHXWLFDUHDV2QHFKDOOHQJHLQWKHDOORFDWLRQRIUHVRXUFHVLVWKH
VHOHFWLRQ DQG PDQDJHPHQW RI WKH PRVW SURILWDEOH SURMHFWV WKDW MXVWLI\ WKH FRVWV RI
SURSULHWDU\GUXJGHYHORSPHQW7KLVWDVNLVIXUWKHUDPSOLILHGE\WKHVPDOOFRPSDQ\VL]H
FRPSDUHGWRPDQ\RILWVFRPSHWLWRUV
3URMHFW'HVFULSWLRQ
7KH5 'SURMHFWXQGHUVWXG\LVFXUUHQWO\LQFOLQLFDOVWXGLHV7KHODXQFKLVIRUHFDVWHGWR
WDNH SODFH EHIRUH \HDU ERWK LQ WKH (8 DQG LQ WKH 86 3DWHQW FRYHUDJH KDV EHHQ
VHFXUHG IRU WKH PDLQ JHRJUDSKLFDO DUHDV 7KH WDUJHWHG SDWLHQW SRSXODWLRQ LV FXUUHQWO\
DURXQGPLOOLRQJOREDOO\DQGLWLVH[SHFWHGWRGRXEOHE\WKH\HDU 7KHSDWLHQW
SRSXODWLRQ LV GLYLGHG LQWR WZR VXEJURXSV JURXS DFFRXQWLQJ IRU DQG JURXS
DFFRXQWLQJ IRU RI WKH WRWDO SRSXODWLRQ 7KLV GLYLVLRQ LV LPSRUWDQW EHFDXVH WKH
FOLQLFDOVWXGLHVKDYHWREHFDUULHGRXWVHSDUDWHO\IRUERWKSDWLHQWJURXSV7KHJURZWKLQ
WKH QXPEHU RI SDWLHQWV LQ WKH IXWXUH LV GXH WR WKH LQFUHDVH LQ WKH QXPEHU RI JURXS
SDWLHQWV ZKLFK VWUHQJKWHQV WKH JURXS GRPLQDQFH RYHU WKH JURXS SRSXODWLRQ $Q
RYHUYLHZRQWKHFOLQLFDOGHYHORSPHQWSODQLVJLYHQLQ)LJXUHEHORZ
$QQXDO5HSRUWSS
6RQMD%M|UNOXQG0RUJDQ6WDQOH\'HDQ:LWWHU
7KH FDVH SURMHFW LV GHVFULEHG ZLWKLQ WKH OLPLWDWLRQV VHW E\ D 1RQ'LVFORVXUH $JUHHPHQW $ VHSDUDWH
DSSHQGL['LVSURYLGHGIRUWKHFDVHFRPSDQ\WRUHYHDOWKHUHDOFRQWH[W
'DWDVRXUFH:RUOG+HDOWK2UJDQLVDWLRQ:+2
<HDU
*URXS )LUVWSDUW
RI3KDVH,, 6HFRQGSDUW
*URXS
RI3KDVH,, )LOLQJ /DXQFK
*URXSRYHUWV\PSWRPV
*URXSLQFLSLHQWV\PSWRPV 3KDVH,,,
*URXSRYHUWV\PSWRPV
)LJXUH&OLQLFDOGHYHORSPHQWSODQIRUWKHFDVHSURMHFW
7KH SURRI RI FRQFHSW ²VWXGLHV XQGHU ZD\ DUH FRQGXFWHG WR FRQILUP WKH HIIHFW RI WKH
FRPSRXQGRQKXPDQV7KLVSDUWRIWKHFOLQLFDOVWXGLHVLVGRQHRQDSRSXODWLRQRIJURXS
SDWLHQWV7KHQH[WPDMRUGHFLVLRQLVZKHWKHUWRHQWHUWKHQH[WSKDVHRIFOLQLFDOVWXGLHV
7KHPDLQVWXGLHVDUHSODQQHGWREHFRQGXFWHGRQJURXSSDWLHQWVVLQFHWKHVXUURJDWH
HQGSRLQWVRIRYHUWV\PSWRPVRIWKHWDUJHWGLVHDVHDUHDFFHSWHGE\WKHPDLQUHJXODWRU\
DXWKLRULWLHV +RZHYHU GXH WR WKH PXFK ODUJHU VKDUH RI JURXS SDWLHQWV D SURJUDP
ZLWKVXUURJDWHHQGSRLQWVRIRYHUWV\PSWRPVIRUWKLVSRSXODWLRQLVDOVRLQFOXGHGLQWKH
FOLQLFDOGHYHORSPHQWSODQ,QJHQHUDOUHJXODWRU\DSSURYDOIRUDGUXJLQWHQGHGIRUJURXS
SDWLHQWV LV PRUH GLIILFXOW WR DWWDLQ IRU DQ\ W\SH RI HQGSRLQW EHFDXVH WKH SDWLHQW
SRSXODWLRQLVPRUHKHWHURJHQRXVDQGEHFDXVHWKHSURJUHVVLRQRIWKHGLVHDVHLVIRXQGWR
EHOHVVSUHGLFWDEOH
5HDO2SWLRQ5HFRJQLWLRQDQG9DOLGDWLRQ
7KH WZR UHDO RSWLRQV WR EH LGHQWLILHG ZHUH WKH RSWLRQ WR DEDQGRQ DQG WKH SRVVLEOH
JURZWKRSWLRQVHPEHGGHGLQWKHFDVHSURMHFW$QDGGLWLRQDOUHOHYDQWUHDORSWLRQLVWKH
SRVVLELOLW\RIVHOOLQJWKHULJKWVRIWKHSURMHFWWRDQRWKHUSDUW\DWVRPHVWDJHRIWKHFOLQLFDO
GHYHORSPHQW
$VWKHRSWLRQWRDEDQGRQLVLQKHUHQWLQWKHSURMHFWLWVLGHQWLILFDWLRQLVDPDWWHURIVLPSOH
QRWLILFDWLRQ
+RZHYHUWKHLGHQWLILFDWLRQRIWKHPRVWYDOXDEOHJURZWKRSWLRQVLVDPRUHLQWHUHVWLQJ
TXHVWLRQ2QHK\SRWKHWLFDOO\YHU\SURILWDEOHJURZWKRSWLRQHPEHGGHGLQWKHFDVHSURMHFW
ZDV LGHQWLILHG DQG YDOLGDWHG E\ LQWHUYLHZLQJ PHPEHUV RI WKH SURMHFW WHDP PRUH
VSHFLILFDOO\ LW LV WKH RSWLRQ WR PDUNHW WKH ILQDO GUXJ IRU JURXS SDWLHQWV VXIIHULQJ IURP LQFLSLHQW
V\PSWRPVRIWKHGLVHDVH&XUUHQWO\UHJXODWRU\DXWKRULWLHVLQWKHPDLQPDUNHWVGRQRWDFFHSW
LQFLSLHQW V\PSWRPV DV D VXUURJDWH HQGSRLQW IRU D GUXJ RQ SDWLHQWV IURP WKH JURXS
SRSXODWLRQ+RZHYHUGXHWRWKHLQFUHDVLQJQXPEHURISDWLHQWVLQWKHIXWXUHDQGWRWKH
LQFUHDVLQJ FRVWV WR WKH KHDOWK FDUH V\VWHP SUHVVXUHV WRZDUGV DFFHSWLQJ LQFLSLHQW
V\PSWRPV DV D VXUURJDWH HQGSRLQW ZLOO PRVW OLNHO\ LQWHQVLI\ 7KH YDOXH RI WKLV JURZWK
,QFLSLHQWV\PSWRPVIRUW\SH,SRSXODWLRQDUHDFFHSWHGE\WKH(8RIILFLDOVEXWQRWE\WKH86RIILFLDOV
(VSHFLDOO\ZLWK3lLYL$KR3URMHFW&KDPSLRQ2ULRQ3KDUPDDQGZLWK,OSR3XKDNDLQHQ&OLQLFDO
'HYHORSPHQW/HDGHU2ULRQ3KDUPD
7KHLQFUHDVHLQSXEOLFWUHDWPHQWFRVWVRISDWLHQWVVXIIHULQJIURPVHULRXVRYHUWV\PSWRPVZDV%LOOLRQ
86'LQWKH86LQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
RSWLRQLVVLJQLILFDQWDVWKHQXPEHURIWKHJURXSSDWLHQWVZKRVXIIHUIURPLQFLSLHQW
V\PSWRPVLVPXFKODUJHUFRPSDUHGWRWKHQXPEHURISDWLHQWVZLWKRYHUWV\PSWRPVRUWR
SDWLHQWV ZLWK DQ\ V\PSWRPV DPRQJ JURXS 7KH SRSXODWLRQ RI JURXS SDWLHQWV LV
DSSUR[LPDWHO\QLQHWLPHVWKDWRIJURXSSDWLHQWVDQGLQFLSLHQWV\PSWRPVDSSHDURQHWR
VL[WLPHVPRUHRIWHQWKDQRYHUWV\PSWRPVRQSDWLHQWVWKHH[DFWUDWLRGHSHQGLQJRQGDWD
VRXUFH
6HOHFWLRQDQG'HVFULSWLRQRI9DOXDWLRQ0HWKRGRORJ\
7KH YDOXDWLRQ RI WKH RSWLRQ WR DEDQGRQ DQG WKH JURZWK RSWLRQ DUH FRQGXFWHG ZLWK D
VSUHDGVKHHW SURJUDP 06 ([FHO 7KLV ZLOO HQDEOH DQ HDV\ SHUIRUPDQFH RI VHQVLWLYLW\
DQDO\VLVDQGDIXUWKHUH[DPLQDWLRQRIWKHFDOFXODWLRQUHVXOWV0RUHRYHUWKHYDOXHRIWKH
RSWLRQWRVHOOWKHSURMHFWWRDQRWKHUSDUW\FDQEHHVWLPDWHGRQO\ZKHQWKHYDOXHVRIWKH
RSWLRQWRDEDQGRQDQGWKHJURZWKRSWLRQDUHFDOFXODWHG
7KH2SWLRQWR$EDQGRQ
7KHPDQDJHULDOIOH[LELOLW\RISRVVLEOHSURMHFWDEDQGRQPHQWLVYDOXHGDVDQ$PHULFDQSXW
RSWLRQ $ ELQRPLDO ODWWLFH LV LPSOHPHQWHG WR UHSUHVHQW WKH SRVVLEOH FKDQJHV LQ SURMHFW
YDOXHGXULQJWKHHVWLPDWHGOHQJWKRIWKH5 'SURMHFW7KHFXUUHQWYDOXHRIWKHHVWLPDWHG
IXWXUH VDOHV LH WKH XQGHUO\LQJ DVVHW YDOXH LV WKH VWDUWLQJ SRLQW RI WKH ODWWLFH 7KH
FRQVWUXFWLRQRIWKHODWWLFHLVGHSLFWHGLQ)LJXUHEHORZ
(VWLPDWHGYDOXHRISURMHFW
+
+
+
+
&XUUHQW +
QHWSUHVHQWYDOXH
RIWKHSURMHFW
+
+
%UHDNHYHQLQ
SURMHFWYDOXH -
-
$5($2)352-(&7$%$1'210(17 -
-
-
7,0(
-
7LPHWRPDWXULW\ 0DUNHWODXQFK
)LJXUH$ELQRPLDOODWWLFHUHSUHVHQWLQJSRVVLEOHIOXFWXDWLRQVDQGHQGVWDWHVLQWKHWRWDOYDOXHRIWKH
SURMHFW
7KHJHQHUDOLGHDLVWRORRNDWHDFKQRGHLQWKHELQRPLDOODWWLFHDWHDFKSHULRGDQGGHFLGH
,OSR3XKDNDLQHQ&OLQLFDO'HYHORSPHQW/HDGHU2ULRQ3KDUPD
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
ZKHWKHU LW LV SURILWDEOH WR FRQWLQXH LQYHVWLQJ RU ZKHWKHU WKH SURMHFW VKRXOG EH
DEDQGRQHGEHFDXVHRIXQIDYRXUDEOHWHFKQLFDORUHFRQRPLFRXWFRPHV7KHG\QDPLFVLQ
WKHYDOXHRIIXWXUHVDOHVIROORZWKHELQRPLDOPRGHOZLWKHLWKHUDQXSZDUGRUDGRZQZDUG
FKDQJH LQ WKHLU YDOXH DW HDFK WLPH VWHS $W VRPH QRGHV DQG HQG VWDWHV SURMHFW
DEDQGRQPHQWEHFRPHVRSWLPDODVWKHHVWLPDWHGFRVWVH[FHHGWKHSURMHFWUHYHQXHV7KH
YDOXH RI WKH DEDQGRQPHQW RSWLRQ LV FUHDWHG LQ WKHVH QRGHV E\ H[HUFLVLQJ WKH
DEDQGRQPHQWRSWLRQDQGE\DYRLGLQJWKHORVVHV
7KH ODWWLFH LV FRQVWUXFWHG E\ UROOLQJ IRUZDUG WKH SRVVLEOH HQG VWDWHV IURP WKH JURVV
SUHVHQWYDOXHRISURMHFWVDOHVZKLFKLVFDOFXODWHGE\VRPHRIWKHWUDGLWLRQDOPHWKRGV
7KH XSZDUG X DQG GRZQZDUG G PRYHPHQWV LQ SURMHFW YDOXH IURP HDFK QRGH DUH
FDOFXODWHG ZLWK WKH KHOS RI WKH HVWLPDWH IRU WKH DQQXDO XQGHUO\LQJ DVVHW YRODWLOLW\ VHH
DSSHQGL[ ' HTXDWLRQV $$ 7KH FRPSRVLWLRQ RI WKH ODWWLFH IRU WKH ILUVW IRXU
SHULRGVLVLOOXVWUDWHGLQ)LJXUHEHORZ7KHOHWWHU9VWDQGVIRUWKHJURVVSUHVHQWYDOXH
RISURMHFWVDOHVDWSHULRGW
Vuuu
Vuu
Vu
Vuud
Vud
V )25:$5'
&$/&8/$7,21
Vddu
Vd
Vdd
Vddd
7LPH
t0 t1 t2 t3
)LJXUH7KHILUVWSDUWRIWKHELQRPLDOODWWLFHLVFRQVWUXFWHGE\UROOLQJIRUZDUGWKHSRVVLEOHUHDOLVDWLRQV
IRUWKHYDOXHRISURMHFWVDOHV
7KH ODWWLFH LQFOXGHV DOO WKH SODQQHG 5 ' LQYHVWPHQWV DW HDFK SHULRG 7KH LQYHVWPHQWV
DUH LPSOHPHQWHG DW DOO QRGHV FRUUHVSRQGLQJ WR D FHUWDLQ WLPH SHULRG )RU H[DPSOH LQ
)LJXUHLQYHVWPHQWVGXHLQSHULRGIRXUDUHLQFOXGHGLQQRGHV9 9 9 DQG9 XXX XXG GGX XXX
7KH ULVN QHXWUDO SUREDELOLWHV S DQG S ZKLFK GHQRWH WKH SUREDELOLWLHV RI XSZDUG RU
GRZQZDUGFKDQJHVLQDVVHWYDOXHDUHFDOFXODWHGIURPHTXDWLRQRIFKDSWHU%\
IROORZLQJ WKHVH SULQFLSOHV WKH ODWWLFH LV UROOHG IRUZDUG XQWLO WKH WLPH WR PDWXULW\ RI WKH
DEDQGRQPHQWRSWLRQ7KHWLPHWRPDWXULW\LVWKHOHQJWKRIWLPHIURPWKHFXUUHQWSHULRG
XQWLOPDUNHWODXQFK)RUWKHFDVHSURMHFWWKHWLPHWRPDUNHWODXQFKLVHVWLPDWHGDWVHYHQ
\HDUV %\VHWWLQJWKHIL[HGWLPHSHULRGEHWZHHQFKDQJHVLQ DVVHW YDOXH DV PRQWKV ZH
HQGXSZLWK
SRVVLEOHHQGVWDWHVIRUSURMHFWYDOXH$WWKLVVWDJHWKHODWWLFH
LQFOXGHV WKH SRVVLEOH UHDOLVDWLRQV RI WKH 5 ' SURMHFW LH GHWHUPLQLVWLF RXWFRPHV
IURPWKH5 'DFWLYLWLHVZLWKRXWWKHYDOXHRIWKHDEDQGRQHPHQWRSWLRQ
2QFHWKHODWWLFHLVUROOHGIRUZDUGXQWLOWKHWLPHWRPDWXULW\ZHVWDUWFRXQWLQJEDFNZDUGV
$QH[SOLFLWGLVFXVVLRQRQWKHHVWLPDWLRQRISDUDPHWHUVWRWKHODWWLFHLVSUHVHQWHGLQWKHIROORZLQJVHFWLRQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
WKHWRWDOYDOXHRIWKHSURMHFWD\HDFKSHULRGZLWKWKHYDOXHRIWKHDEDQGRQPHQWRSWLRQLQFOXGHG
8VLQJWKHULVNQHXWUDOSUREDELOLWLHVDQGWKHULVNIUHHWLPHYDOXHRIPRQH\WKHWRWDOYDOXH
RI WKH SURMHFW LV FDOFXODWHG IURP WKH SRVVLEOH IXWXUH FKDQJHV LQ SURMHFW YDOXH )RU
H[DPSOH LQ )LJXUH WKH YDOXH RI WKH 5 ' SURMHFW DW QRGH 9 LV FDOFXODWHG ZLWK
XX
HTXDWLRQ
pV + (1 − p )Vuud
max uuu − I ,0
r
DVVXPLQJWKHUHLVDQLQYHVWPHQW,DWSHULRGW 7KHYDOXHDWHDFKQRGHLVWKHPD[LPXPRI
WKHWRWDOYDOXHRIWKHSURMHFWLQWKHQRGHDQG]HUR,IWKHSURMHFWYDOXHIDOOVEHORZ]HUR
WKHRSWLRQWRDEDQGRQLVH[HUFLVHGDQGQRORVVHVZLOODFFUXH
+RZHYHU WKH YRODWLOLW\ LQ WKH YDOXH RI WKH VDOHV UHSUHVHQWV RQO\ WKH PDUNHW XQFHUWDLQW\ LQ
SURMHFW YDOXH7HFKQLFDO XQFHUWDLQW\ LQ WKH VXFFHVV RI GLIIHUHQW FOLQLFDO GHYHORSPHQW VWDJHV
PXVWEHLQFOXGHGLQWKHODWWLFHDVZHOO7KLVLVLPSOHPHQWHGE\PXOWLSO\LQJHTXDWLRQ
E\WKHSUREDELOLW\RIVXFFHVVDWWKHFRUUHVSRQGLQJWLPHSHULRG87VHHHTXDWLRQ
pVuuu + (1 − p)Vuud
max − I ,0 × U T
r
)RUH[DPSOHLIWKHSUREDELOLW\RIVXFFHVVGXULQJ5 'RI\HDULVWKHILUVWQRGH
FRUUHVSRQGLQJ WR WKH ILUVW WKUHH PRQWKV RI \HDU LV PXOWLSOLHG E\ 7KH QH[W WKUHH
QRGHV FRUUHVSRQGLQJ WR WKH UHPDLQLQJ QLQH PRQWKV RI \HDU DUH PXOWLSOLHG E\
UHVSHFWLYHO\
7KH FXUUHQW YDOXH RI WKH 5 ' SURMHFW LQFOXGLQJ WKH RSWLRQ WR DEDQGRQ LV UHDFKHG E\
FRXQWLQJEDFNZDUGVWKHWRWDOYDOXHRIWKHSURMHFWDWDOOQRGHVIURPWKHHQGRIWKHODWWLFH
XQWLOWKHFXUUHQWSHULRG,IWKHSURMHFWLVQHYHUDEDQGRQHGLHLI]HURLVQHYHUFKRVHQLQ
WKHHTXDWLRQVFRUUHVSRQGLQJWKHHTXDWLRQWKHFXUUHQWYDOXHRIWKH5 'SURMHFWLV
LGHQWLFDO WR WKH QHW SUHVHQW YDOXH DWWDLQHG ZLWK WKH WUDGLWLRQDO YDOXDWLRQ PHWKRGV ,Q
HVVHQFH WKH RSWLRQ WR DEDQGRQ FDQ RQO\ LQFUHDVH WKH WRWDO YDOXH RI WKH SURMHFW ,I WKH
SURMHFWLVQRWDEDQGRQHGDWDQ\QRGHQRDGGLWLRQDOYDOXHLVFUHDWHG
7KH*URZWK2SWLRQ
%DVHG RQ WKH GLVFXVVLRQ LQ FKDSWHU WKH JURZWK RSWLRQ FDQ EH PRGHOHG DV D
(XURSHDQSXWRSWLRQ:HUHFDOOWKHRSWLRQDVEHLQJWKHRSSRUWXQLW\WRPDUNHWWKHILQDO
GUXJIRUJURXSSDWLHQWVVXIIHULQJIURPLQFLSLHQWV\PSWRPVRIWKHWDUJHWLQGLFDWLRQ$
FULWLFDO DVVXPSWLRQ LV WKDW WKH RSWLRQ EHFRPHV DYDLODEOH RQO\ ZKHQ WKH RULJLQDO 5 '
SURMHFWLVILQLVKHGLHLQVHYHQ\HDUV·WLPH,QWKLVZD\WKH5 'LQYHVWPHQWVSODQQHGIRU
WKHIROORZLQJVHYHQ\HDUVDUHDQHFHVVDU\FRQGLWLRQIRUWKHDFTXLVLWLRQRIWKHIROORZRQ
LQYHVWPHQW RSSRUWXQLW\ 7R YDOXH WKLV JURZWK RSWLRQ D FRQWLQXRXV FRQWLQJHQW FODLPV
DQDO\VLV LV XVHG LQ WKH IRUP RI WKH %ODFN6FKROHV VROXWLRQ IRU WKH YDOXH RI D QRQ
GLYLGHQG SD\LQJ (XURSHDQ FDOO RSWLRQ 7KH VROXWLRQ HTXDWLRQ DQG WKH FRUUHVSRQGLQJ
%ODFN ) 6FKROHV 0 7KH 3ULFLQJ RI 2SWLRQV DQG &RUSRUDWH /LDELOLWLHV -RXUQDO RI 3ROLWLFDO
(FRQRP\SS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
SDUDPHWHUYDOXHV DUHVWDWHGLQ)LJXUH
1RWDWLRQ
G = VN (d 1 ) − N (d 2 )
I
e rT * 9DOXHRIWKHJURZWKRSWLRQ
, &DSLWDOLQYHVWPHQWVWREHPDGH
d1 =
(
ln(V / I ) + r + σ T 1
2
2
) 9 &XUUHQWYDOXHRIWKHIXWXUHFDVK
LQIORZV
σ T 5 5LVNIUHHLQWHUHVWUDWH
σ 6WDQGDUGGHYLDWLRQRIIXWXUHFDVK
d2 =
(
ln (V I ) + r + 12 σ 2 T ) = d1 − σ T
LQIORZV
7 7LPHWRH[SLUDWLRQ
σ T 1 &XPXODWLYHVWDQGDUGQRUPDO
GLVWULEXWLRQIXQFWLRQ
)LJXUH9DOXHRID(XURSHDQJURZWKRSWLRQXVLQJWKH%ODFN6FKROHVHTXDWLRQ
7KH YDOXDWLRQ RI WKH LGHQWLILHG JURZWK RSSRUWXQLW\ LV D PDWWHU RI SOXJJLQJ HVWLPDWHG
SDUDPHWHU YDOXHV LQWR WKH VWDQGDUG VROXWLRQ IRUPXOD 7KH GHULYDWLRQ RI WKH IRUPXOD
IROORZVFORVHO\WKHOLQHRIUHDVRQLQJRIDSSHQGL[%DQGZLOOQRWEHSUHVHQWHGKHUH7KH
YDOXHRIWKHJURZWKRSWLRQLQFUHDVHVWKHYDOXHRIWKH5 'SURMHFWDWFXUUHQWSHULRG
3DUDPHWHU(VWLPDWLRQ
,Q RUGHU WR FODULI\ WKH LPSOHPHQWDWLRQ RI WKH RSWLRQ YDOXDWLRQ DQ H[SODQDWLRQ RQ
SDUDPHWHU HVWLPDWLRQ LV SUHVHQWHG 1R GLYLGHQG \LHOG RU OHDNDJH LQ XQGHUO\LQJ DVVHW
YDOXHLVDVVXPHGWREHSUHVHQWLQWKHDEDQGRQPHQWRSWLRQQRULQWKHJURZWKRSWLRQ
7KH2SWLRQWR$EDQGRQ
7KHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLHJURVVSUHVHQWYDOXHRIWKHHVWLPDWHGVDOHVLV
FDOFXODWHG E\ XVLQJ SUREDELOLW\ZHLJKWHG QHW SUHVHQW YDOXH PHWKRG &DVH FRPSDQ\
DQDO\VWVKDYHHVWLPDWHGWKHSUREDELOLWLHVRIWHFKQLFDODQGPDUNHWVXFFHVVRIWKHSURMHFW
DQG KDYHZHLJKWHGWKHHVWLPDWHVRIIXWXUHVDOHVDQGWRWDOIXWXUHFRVWVDFFRUGLQJO\7KH
FRVWRIFDSLWDOXVHGLQGLVFRXQWLQJWKHFDVKIORZVLV7KLVILJXUHPDWFKHVZHOOZLWK
HPSLULFDO GDWD 7KH WHFKQLFDO VXFFHVV SUREDELOLWLHV IRU GLIIHUHQW SKDVHV RI 5 ' DUH
JLYHQLQ7DEOHEHORZ7KHVHDUHWKHILJXUHVWKDWDUHXVHGIRUWKHUHVSHFWLYH\HDUVLQWKH
ELQRPLDOODWWLFHDVZHOO
7DEOH7HFKQLFDOVXFFHVVSUREDELOLWLHVLQGLIIHUHQWVWDJHVRI5 '
$GHWDLOHGH[SODQDWLRQRQWKHHVWLPDWLRQRIDOOSDUDPHWHUYDOXHVLVSURYLGHGLQWKHIROORZLQJVHFWLRQ
SKDUPDFHXWLFDOLQGXVWU\SRUWIROLRDVRQDYHUDJH
7KHSUREDELOLWLHVZHUHJDWKHUHGE\LQWHUYLHZLQJPHPEHUVRIWKHSURMHFWWHDP
<HDU
6XFFHVV3UREDELOLW\
&XPXODWLYH3UREDELOLW\
$OOGDWDUHFHLYHGIURPWKHFDVHFRPSDQ\DUHXVHGDVVXFK
7DNLQJ WKH GLVFRXQWHG SUHVHQW YDOXH RI WKH IXWXUH VDOHV DV WKH FXUUHQW YDOXH RI WKH
XQGHUO\LQJ DVVHW LV LQ IDFW D ORZHUERXQG DSSUR[LPDWLRQ IRU WKH UHDO XQGHUO\LQJ DVVHW
YDOXH7KLVLVEHFDXVHWKHPDUNHWYDOXHRIDQ\DVVHWLVPRVWRIWHQODUJHUWKDQWKHQRPLQDO
YDOXHLHERRNYDOXHRIWKDWDVVHW$VDQH[DPSOHLIZHDVVXPHWKDWLQYHVWRUVDSSUHFLDWH
WKH PDUNHW YDOXHWRVDOHV UDWLR RI 2ULRQ 3KDUPD WR EH WKUHH WKH UHDO XQGHUO\LQJ DVVHW
YDOXHZRXOGEHWKUHHWLPHVWKHGLVFRXQWHGSUHVHQWYDOXHRIWKHIXWXUHUHYHQXHV,QDQ\
FDVH IRU WKH VDNH RI FRQVHUYDWLYHQHVV ZH DGKHUH WR WKH ORZHUERXQG DSSUR[LPDWLRQ LQ
WKHHVWLPDWLRQRIWKHXQGHUO\LQJDVVHWYDOXH
R&D Investments
7KH FDVH FRPSDQ\ KDV SURYLGHG DQQXDO HVWLPDWHV IRU WKH IXWXUH 5 ' FRVWV IRU WKH
IROORZLQJVHYHQ\HDUV7KH\DUHDVVXPHGWREHIL[HGLQDGYDQFH,QWKHELQRPLDOODWWLFH
WKH5 'FRVWVIRUDFHUWDLQ\HDUDUHDOORWWHGWRWKHQRGHFRUUHVSRQGLQJWRWKHILUVWWKUHH
PRQWKV RI WKH \HDU 7KH IROORZLQJ WKUHH QRGHV FRUUHVSRQGLQJ WR WKH UHPDLQJ QLQH
PRQWKVRIWKH\HDUDUHDOORWWHG]HURFRVWV7KLVFKRLFHUHIOHFWVWKHEXGJHWLQJF\FOHRIRQH
\HDU DW WKHFDVHFRPSDQ\%HDFDXVHDOOFDVKIORZV LQ WKH ODWWLFH DUH GLVFRXQWHG ZLWK WKH
ULVNIUHHUDWHRILQWHUHVWWKHLQYHVWPHQWVDWGLIIHUHQWSHULRGVKDYHWR EH PDGH FHUWDLQW\
HTXLYDOHQW 7KLV LV GRQH E\ PXOWLSO\LQJ HYHU\ LQYHVWPHQW IRU D FHUWDLQ SHULRG ZLWK D
FRUUHVSRQGLQJFHUWDLQW\HTXLYDOHQWIDFWRU&() (VVHQWLDOO\WKLVFRQYHUVLRQLVGXHWR
WKHDVVXPSWLRQRIDULVNQHXWUDOZRUOGLQWKHELQRPLDOPRGHO0RUHRYHUZHFDQHDVLO\
FRPSDUH WKH YDOXDWLRQ UHVXOWV ZLWK WKRVH REWDLQHG E\ WKH WUDGLWLRQDO PHWKRGV DIWHU WKH
FRQYHUVLRQ1HWSUHVHQWYDOXHFDOFXODWLRQVGLVFRXQWDOOFDVKIORZVLQFOXGLQJLQYHVWPHQWV
ZLWKDULVNDGMXVWHGGLVFRXQWUDWH,QRUGHUWRFRQGXFWWKHFRPSDULVRQFRUUHFWO\WKHULVN
DGMXVWHG GLVFRXQW UDWH KDV WR EH FRQYHUWHG LQWR D ULVNIUHH UDWH &HUWDLQW\ HTXLYDOHQW
IDFWRUV IRU HDFK \HDU LQ WKH IXWXUH DUH REWDLQHG E\ UDLVLQJ WKH ILJXUH IRU \HDU WR WKH
SRZHURIWKHUHVSHFWLYH\HDU$OOILJXUHVDUHOLVWHGLQ7DEOHEHORZ
7DEOH&HUWDLQW\HTXLYDOHQWIDFWRUVIRUHDFK\HDU
<HDU
6RXUFH)LQDQFLDO7LPHV
&HUWDLQW\HTXLYDOHQWIDFWRUIRU\HDU ULVNIUHHLQWHUHVWUDWHULVNDGMXVWHGLQWHUHVWUDWH
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
Asset Volatility
´7KH WZLQFRPSDQ\ PHWKRGµ LV DSSOLHG DV WKH PHDQV RI HVWLPDWLQJ YRODWLOLW\ LQ WKH
XQGHUO\LQJ DVVHW YDOXH $V ZH UHFDOO WKH JURVV SUHVHQW YDOXH RI WKH HVWLPDWHG VDOHV LV
DVVXPHGWRIOXFWXDWHVWRFKDVWLFDOO\IROORZLQJDORJQRUPDOUDQGRPSURFHVVLHLQDZD\
WKDWWKHORJDULWKPRIWKHFKDQJHVLQWKHJURVVSUHVHQWYDOXHRIWKHSURMHFWDUHGLVWULEXWHG
QRUPDOO\ %\ DVVXPLQJ WKDW WKH YRODWLOLWLHV LQ WKH YDOXH RI WKH FRPSDUDEOH FRPSDQLHV
DSSUR[LPDWHWKHYRODWLOLW\RIHVWLPDWHGVDOHVZHDUULYHDWDURXJKHVWLPDWHIRUWKHDQQXDO
YRODWLOLW\LQWKHHVWLPDWHGVDOHVRIWKHFDVHSURMHFW 7ZR FRPSDQLHV DFWLYH LQ WKH WDUJHW
PDUNHW ZHUH LGHQWLILHG DQG WKHLU GDLO\ VWRFN SULFHV IRU WKH WZR\HDU SHULRG
ZHUH FROOHFWHG 8VLQJ WKLV GDWD LQ HTXDWLRQ VHH VHFWLRQ SS WKH
IROORZLQJDQQXDOYRODWLOLWLHVIRUWKHUHWXUQIURPVWRFNVRIWKHWZRWZLQFRPSDQLHVZHUH
DWWDLQHG
7DEOH(VWLPDWHGDQQXDOYRODWLOLWLHVRIWKHUHWXUQVIURPWKHVWRFNVRIWZRFRPSDUDEOHFRPSDQLHV
&RPSDQ\
$QQXDOYRODWLOLW\LQUHWXUQV
&RPSDQ\ LV IRFXVHG PDLQO\ RQ WKH WDUJHW PDUNHW RI WKH FDVH 5 ' SURMHFW EXW
FRPSDQ\KDVGLYHUVLILHGDFWLYLWLHVDFURVVWKHUDSHXWLFDUHDV7KHUHIRUHWKHHVWLPDWHVRI
7DEOHVKRXOG·WEHDFFHSWHGDVGHILQLWLYHEXWDVDILUVWUHIHUHQFH
7KHUH H[LVWV DGGLWLRQDO ZKLWH QRLVH LQ WKH HVWLPDWHV IRU DVVHW YRODWLOLW\ EHFDXVH WKH
SRVLWLYHFDVKIORZVIURPWKHSURMHFWDUHRQO\DSUR[\IRUWKHXQGHUO\LQJDVVHWYDOXH7KH
UHDOXQGHUO\LQJDVVHWYDOXHZRXOGEHWKHPDUNHWYDOXHRIWKHLQYHVWPHQWRSSRUWXQLW\DV
VXJJHVWHGDERYH7KHFDOFXODWLRQRIWKHYRODWLOLW\IURPWKHVWRFNVRIWZRSXEOLFO\WUDGHG
WZLQFRPSDQLHV LQFOXGHV DQ LPSOLFLW DVVXPSWLRQ RI LGHQWLFDO YRODWLOLWLHV LQ WKH PDUNHW
YDOXHDQGLQWKHFDVKIORZVRIDQLQYHVWPHQWRSSRUWXQLW\1RQHWKHOHVVWKLVDVVXPSWLRQLV
DGKHUHGWRLQWKHFDOFXODWLRQVWKRXJKLWLQFUHDVHVWKHHUURULQWKHHVWLPDWHV
Time to Maturity
7KH WLPH WR PDWXULW\ LV DVVXPHG WR EH VHYHQ \HDUV $V WKH RSWLRQ LV $PHULFDQ LW LV
DYDLODEOHWRWKHGHFLVLRQPDNHUVDWHYHU\QRGHRIWKHELQRPLDOODWWLFH
Dividend Yield
1RGLYLGHQG\LHOGRU´OHDNDJHµLQXQGHUO\LQJDVVHWYDOXHLVDVVXPHGWREHSUHVHQWLQWKLV
FDVHSURMHFW7KHWDUJHWHGSDWLHQWSRSXODWLRQLVJURZLQJUDSLGO\DQGIHZFXUUHQWRUIXWXUH
7KHFRPSDQLHVUHSUHVHQWRYHURIWKHVDOHVLQWKHWDUJHWPDUNHWFXUUHQWO\DFFRUGLQJWR5LNX/DSSL
2ULRQ3KDUPD7KHQDPHVRIWKHFRPSDQLHVDUHSUHVHQWHGLQDSSHQGL['
7KHFRQYHUVLRQFRHIILFLHQWLQHTXDWLRQLVVLQFHWKHUHDUHEXVLQHVVGD\VLQD\HDU
7KHIROORZLQJSDSHUSURYHGWREHXVHIXOLQWKHFDOFXODWLRQRIWKHYRODWLOLWLHV:LQVWRQ:/$
7XWRULDORQ8VLQJ(;&(/DQG(;&(/$GGLQVWR9DOXH5HDO2SWLRQV:RUNLQJ3DSHU.HOOH\6FKRRORI
%XVLQHVV
WKHULJKWIUDPHZRUNDWWKHH[SHQVHRIH[FHVVLYHGHWDLOµ
7KH*URZWK2SWLRQ
7KHHVWLPDWHVIRUWKHH[HUFLVHSULFHRIWKHJURZWKRSWLRQDQGIRUWKHFXUUHQWYDOXHRIWKH
XQGHUO\LQJ DVVHW DUH ERWK PXOWLSOLHG ZLWK WKH FXPXODWLYH WHFKQLFDO VXFFHVV SUREDELOLW\
RI RQJRLQJ 5 ' SURMHFW 7KLV LV WKH FXPXODWLYH SUREDELOLW\ WKDW WKH GHFLVLRQ
PDNHUVZLOOKDYHWKHJURZWKRSWLRQDYDLODEOHLQVHYHQ\HDUV·WLPH
7KHH[HUFLVHSULFHRIWKHJURZWKRSWLRQLVWKHSUHVHQWYDOXHRIWKH5 'FRVWVDWWKH
PRPHQW RI RSWLRQ H[SLU\ LH DIWHU VHYHQ \HDUV ² RI GHYHORSLQJ D GUXJ IRU JURXS
SDWLHQWV VXIIHULQJ IURP LQFLSLHQW V\PSWRPV RI WKH GLVHDVH 6LQFH QR H[SOLFLW FDVKIORZ
DQDO\VHV IRU WKLV IROORZRQ LQYHVWPHQW RSSRUWXQLW\ ZHUH DYDLODEOH WKH FRVW HVWLPDWHV
ZHUHPDGHUHODWLYHWRWKHILJXUHVIURPWKHRQJRLQJ5 'SURMHFW$VZDVQRWHGDERYH
WKHSRVVLEOHPDUNHWRIWKHJURZWKRSSRUWXQLW\LVVXEVWDQWLDOO\ODUJHULQVL]HFRPSDUHGWR
WKHRQJRLQJ5 'SURMHFW,QWKHFDOFXODWLRQV,HVWLPDWHWKDWWKHJURZWKRSSRUWXQLW\LVWKUHHWLPHV
ODUJHUWKDQWKHRQJRLQJ5 'SURMHFW7KLVLQFOXGHVH[SHFWHGUHYHQXHVDQGHVWLPDWHGLQYHVWPHQWFRVWV
%DVHG RQ WKH HVWLPDWH RQ WKH VL]H RI WKH SRWHQWLDO PDUNHWV WKLV D FRQVHUYDWLYH
DVVXPSWLRQ ,QDQ\FDVHPRUHLQWHUHVWLQJWKDQWKHDEVROXWHVL]HRIWKHJURZWKRSWLRQ
LVWKHFRPSDULVRQEHWZHHQWKHYDOXDWLRQUHVXOWVIURPWKH%ODFN6FKROHVORJLFDQGWKRVH
REWDLQHGZLWKWKHVWDQGDUGQHWSUHVHQWYDOXHFDOFXODWLRQV
7KH FXUUHQW YDOXH RI WKH XQGHUO\LQJ DVVHWV LV WKH SUHVHQW YDOXH LQ \HDU ]HUR RI WKH
GLVFRXQWHG SRVLWLYH FDVKIORZV RI WKH IROORZRQ LQYHVWPHQW RSSRUWXQLW\ )ROORZLQJ WKH
OLQHRIUHDVRQLQJDERYHWKHSRVLWLYHFDVKIORZVDUHDVVXPHGWREHWKUHHIROGUHODWLYHWR
WKH RQJRLQJ5 'SURMHFW)LUVWWKHFDVKIORZVDUHGLVFRXQWHGEDFNWR WKH SHULRG DIWHU
VHYHQ\HDUVDQGILQDOO\EDFNWRWKHFXUUHQWSHULRGLQRUGHUWRGHULYHWKHLUFXUUHQWYDOXH$
GLVFRXQWUDWHRILVXVHGLQWKHFDOFXODWLRQV
$VWKHWDUJHWPDUNHWRIWKHIROORZRQLQYHVWPHQWRSSRUWXQLW\LVURXJKO\WKHVDPHDVLQ
WKHFDVHRIWKHRSWLRQWRDEDQGRQWKHWZRDSSUR[LPDWLYHHVWLPDWHVRI7DEOHDUHWDNHQ
DVDILUVWUHIHUHQFHKHUHDVZHOO
$PUDP0.XODWLODND15HDO2SWLRQV²0DQDJLQJ6WUDWHJLF,QYHVWPHQWLQDQ8QFHUWDLQ:RUOG
+DUYDUG%XVLQHVV6FKROO3UHVV%RVWRQ0DVVDFKXVHWWV
7KLVZDVFRQILUPHGE\GDWDRQGHYHORSPHQWFRVWVSURYLGHGE\3lLYL$KR2ULRQ3KDUPD
Time to Expiration
7KHWLPHWRH[SLUDWLRQLVDVVXPHGWREHVHYHQ\HDUVIURP\HDU]HURWR\HDUVHYHQ$VWKH
JURZWKRSWLRQLV(XURSHDQLWLVDVVXPHGQRWWREHDYDLODEOHWRWKHGHFLVLRQPDNHUVSULRU
WRWKHPRPHQWRIRSWLRQH[SLU\LQ\HDUVHYHQ
Dividend Yield
1RGLYLGHQG\LHOGVDUHDVVXPHGWREHSUHVHQWEDVHGRQVLPLODUDUJXPHQWVDVLQWKHFDVH
RIWKHRSWLRQWRDEDQGRQ
5HVXOWV
7KHUHVXOWVIURPFDOFXODWLRQVXVLQJDVHWRIIL[HGSDUDPHWHUYDOXHVDUHSUHVHQWHGLQWKUHH
VHSDUDWHWDEOHVEHORZ,QRUGHUWREHDEOHWRFRPSDUHWKHUHVXOWVWKHYDOXDWLRQVIRUWKH
RQJRLQJ SURMHFW DQG WKH JURZWK RSWLRQ DWWDLQHG E\ DSSO\LQJ WKH WUDGLWLRQDO WRROV DUH
SUHVHQWHGILUVW$OOILJXUHVDUHLQPLOOLRQVRI86'
7DEOH3URMHFWGDWDDQGSURMHFWYDOXDWLRQXVLQJSUREDELOLW\ZHLJKWHGQHWSUHVHQWYDOXHDQDO\VLV
3UHVHQWYDOXHRIHVWLPDWHGWRWDOVDOHV
&XPXODWLYHWHFKQLFDOVXFFHVVSUREDELOLW\IRU\HDU
3UHVHQWYDOXHRIHVWLPDWHGFRVWVXQWLO
7HFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIFRVWVXQWLO
7HFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIFHUWDLQW\HTXLYDOHQWFRVWVXQWLO
5LVNDGMXVWHGGLVFRXQWUDWH
5LVNIUHHLQWHUHVWUDWH
139RIRQJRLQJSURMHFW
3UHVHQWYDOXHRIVDOHVIURPJURZWKRSWLRQLQ
3UHVHQWYDOXHRIVDOHVIURPJURZWKRSWLRQLQ
7HFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIVDOHV
3UHVHQWYDOXHRIGHYHORSPHQWFRVWVRIJURZWK
2SWLRQLQ
7HFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIGHYHORSPHQWFRVWVRI
*URZWKRSWLRQLQ
7HFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIGHYHORSPHQWFRVWVLQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
139RIJURZWKRSWLRQ
´7HFKQLFDO DGMXVWPHQWµ VWDQGV IRU DFFRXQWLQJ IRU WKH FXPXODWLYH WHFKQLFDO VXFFHVV
SUREDELOLW\LQ5 'DFWLYLWLHV7KHILJXUHVIRUWKHSUHVHQWYDOXHRIHVWLPDWHGWRWDOVDOHV
DQGIRUWKHSUHVHQWYDOXHRIHVWLPDWHGFRVWVXQWLOZHUHUHFHLYHGIURPWKH
FDVH FRPSDQ\ DQG DUH DFFHSWHG DV VXFK 7KH ILJXUH IRU FXPXODWLYH WHFKQLFDO VXFFHVV
SUREDELOLW\IRU\HDULVDOVRDVVXPHGWREHNQRZQVHH7DEOH1RWHWKDWWKH
ILQDO139ILJXUHIRUWKHRQJRLQJSURMHFWGRHVQRWLQFOXGHSURMHFWLQYHVWPHQWVDIWHU
\HDU7KLVLVEHFDXVHWKHHQGVWDWHVRIWKHFRQVWUXFWHGELQRPLDOODWWLFHDUHLQ
7KH2SWLRQWR$EDQGRQ
7DEOH7KHWRWDOYDOXHRIWKHSURMHFWLQFOXGLQJWKHYDOXHRIWKHDEDQGRQPHQWRSWLRQ
&XUUHQWYDOXHRISURMHFWLQFOXGLQJWKHRSWLRQWRDEDQGRQ
139RIRQJRLQJSURMHFW
9DOXHRIRSWLRQWRDEDQGRQ
7KHYDOXHRIWKHRSWLRQWRDEDQGRQWKHSURMHFWDWDQ\VWDJHRIWKHFOLQLFDOGHYHORSPHQWLV
086' 86'7KXVWKHYDOXHRIWKHRSWLRQWRDEDQGRQ
LQFUHDVHVWKHWRWDOYDOXHRIWKHSURMHFWE\7KLVILJXUHZDVUHDFKHGXVLQJDQDQQXDO
YRODWLOLW\RILQWKHVDOHVHVWLPDWHV
7KH*URZWK2SWLRQ
7DEOH&XUUHQWYDOXHRIWKHJURZWKRSWLRQFDOFXODWHGZLWKWKH%ODFN6FKROHVIRUPXOD
&XUUHQWYDOXHRIJURZWKRSWLRQ
139RIIROORZRQLQYHVWPHQWRSSRUWXQLW\
,W LV QRWHZRUWK\ WKDW WKH RSWLRQWKHRUHWLF YDOXDWLRQ JLYHV D ORZHU YDOXH IRU WKH JURZWK
RSSRUWXQLW\ WKDQ WKH WUDGLWLRQDO 139 YDOXDWLRQ GRHV 7KLV LV GXH WR WKH UHODWLYHO\ ORZ
HVWLPDWH IRU WKH XQGHUO\LQJ DVVHW YRODWLOLW\ ,Q DQ\ FDVH WKH YDOXH RI WKH JURZWK
RSSRUWXQLW\LQFUHDVHVWKHYDOXHRIWKHRQJRLQJ5 'SURMHFW
7KH2SWLRQWR6HOOWKH3URMHFWWRD6HFRQG3DUW\
7KHRSWLRQWREDLORXWDQGWRVHOOWKHULJKWVRIWKHSURMHFWWRWKHKLJKHVWELGGHULVDOZD\V
DYDLODEOHWRWKHGHFLVLRQPDNHUV7KLVDOWHUQDWLYHLVUHOHYDQWIRUH[DPSOHLIWKHVWUDWHJLF
ILWRUWKHUHTXLUHGUHVRXUFHVRIWKHSURMHFWDUHQRWDOLJQHGZLWKWKHFRPSDQ\VWUDWHJ\,Q
WKHRUHWLFDOWHUPVWKHH[HUFLVHSULFHRIWKLV$PHULFDQSXWRSWLRQLHRSWLRQWRVHOODWDQ\
WLPHLVWKHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWFRPELQHGZLWKWKHYDOXHRIWKHRSWLRQ
WRDEDQGRQDQGZLWKWKHYDOXHRIWKHJURZWKRSWLRQ,QRWKHUZRUGVWKHH[HUFLVHSULFHLV
WKH WRWDO YDOXH RI WKH SURMHFW ,Q UHDOLW\ WKRXJK WKH FRVWV RI ILQGLQJ D ZLOOLQJ EX\HU
LQFUHDVHWKHWUDQVDFWLRQFRVWVDQGFRQWUDFWWHUPVDVZHOODVQHJRWLDWLRQVNLOOVDIIHFWWKH
H[HUFLVH VHOOLQJ SULFH VLJQLILFDQWO\ 7KHUHIRUH WKH YDOXDWLRQ RI WKH RSWLRQ WR VHOO WKH
SURMHFW WR D VHFRQG SDUW\ LV PRUH D TXHVWLRQ RI RSWLPDO FRQWUDFW GHVLJQ DQG VNLOOIXO
QHJRWLDWLQJWKDQDTXHVWLRQRIDFFXUDWHUHDORSWLRQYDOXDWLRQ
6HQVLWLYLW\$QDO\VLV
7KHVHQVLWLYLW\RIERWKUHDORSWLRQVYDOXHVZLWKUHVSHFWWRFKDQJHVLQWKHYRODWLOLW\DQGLQ
WKHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLVH[DPLQHGLQWKLVVHFWLRQ6HQVLWLYLW\DQDO\VHV
ZLWKUHVSHFWWRWKHULVNIUHHUDWHRILQWHUHVWWKHH[HUFLVHSULFHRIWKHRSWLRQRUWKHWLPH
WRPDWXULW\DUHQRWSHUIRUPHG$VKRUWGLVFXVVLRQRQFKDQJHVLQWKHVHSDUDPHWHUYDOXHV
LVSUHVHQWHGWKRXJKLQWKHHQGRIWKHVHFWLRQ
6HH URZ LQ WDEOH 7KH H[HUFLVH SULFH RI WKH JURZWK RSWLRQ LH WKH LQYHVWPHQW FRVW LV WKH
WHFKQLFDOO\DGMXVWHGSUHVHQWYDOXHRIGHYHORSPHQWFRVWVRIJURZWKRSWLRQLQ
6HHURZLQWDEOHWKHXQGHUO\LQJDVVHWYDOXHRIWKHJURZWKRSWLRQLHWKHSUHVHQWYDOXHRIVDOHVLQ
PXVW EH PXOWLSOLHG E\ WKH FXPXODWLYH VXFFHVV SUREDELOLW\ WKDW WKH RSWLRQ FDQ HYHQ WKHRUHWLFDOO\ EH
H[HUFLVHGLQ\HDU
)RUDQLQWURGXFWLRQRQWKHWKHRU\IRUHIILFLHQWFRQWLQJHQWDQGLQFRPSOHWHFRQWUDFWLQJVHH0LOJURP3
7KH2SWLRQWR$EDQGRQ
,Q WKH SUHYLRXVVHFWLRQWKHYDOXHRIWKHRSWLRQWR DEDQGRQ ZDV IRXQG RXW WR EH VPDOO
FRPSDUHG WR WKH WRWDO YDOXH RI WKH 5 ' SURMHFW +RZHYHU WKLV ILJXUH LV
UHODWLYHO\ VHQVLWLYH ZLWK UHVSHFW WR WKH HVWLPDWHG YRODWLOLW\ LQ WKH JURVV SUHVHQW YDOXH RI
VDOHVDVLVVKRZQLQ)LJXUHEHORZ:KHQWKHYRODWLOLW\DSSURDFKHV]HURWKHUHDORSWLRQ
YDOXDWLRQDSSURDFKHVWKH139YDOXDWLRQDVVXJJHVWHGE\WKHWKHRU\2QWKHRWKHUKDQG
ZKHQ YRODWLOLW\ LQFUHDVHV WKH UHVXOWV IURP WKH WZR PHWKRGV EHJLQ WR GLYHUJH 7KLV LV
QDWXUDOVLQFHLQFUHDVHGYRODWLOLW\PDNHVIXWXUHORVVHVPRUHSUREDEOHLQFUHDVLQJWKHYDOXH
RI WKH DEDQGRQPHQW RSWLRQ )RU H[DPSOH XVLQJ DQ HVWLPDWH RI IRU WKH DQQXDO
YRODWLOLW\ LQ IXWXUH VDOHV WKH YDOXH RI WKH DEDQGRQPHQW RSWLRQ EHFRPHV 086' DQ
LQFUHDVHRILQWRWDOSURMHFWYDOXH
6HQVLWLYLW\ZLWKUHVSHFWWR9RODWLOLW\
1399DOXDWLRQ086'
Option Valu
*URVV3UHVHQW
9DOXHRI6DOHV
086'
139
9RODWLOLW\LQ*39
)LJXUH6HQVLWLYLW\ZLWKUHVSHFWWRYRODWLOLW\LQWKHJURVVSUHVHQWYDOXHRIHVWLPDWHGVDOHV$FRQVWDQW
ILJXUHRI086'LVXVHGIRUWKH*39
7KH DQDO\VLV EHFRPHV PRUH LQWHUHVWLQJ ZKHQ DOORZLQJ IRU FKDQJHV LQ WKH YDOXH RI WKH
XQGHUO\LQJ DVVHW ,W LV HYLGHQW IURP )LJXUH WKDW WKH 139DSSURDFK DQG WKH UHDO
RSWLRQVDSSURDFK JLYH FRQYHUJHQW YDOXDWLRQV ZKHQ WKH YDOXH RI WKH XQGHUO\LQJ DVVHW LV
KLJK7KLVUHVXOWLVWUXHLUUHVSHFWLYHRIWKHHVWLPDWHIRUWKHDVVHWYRODWLOLW\ZKLFKFDQEH
H[SODLQHGDVIROORZVLIWKHLQLWLDOHVWLPDWHIRUWKHXQGHUO\LQJDVVHWYDOXHLVKLJKLHWKH
SURMHFWVHHPVYHU\SURILWDEOHWKHQQRWHYHQODUJHYDULDWLRQVLQWKHVDOHVHVWLPDWHVLPSO\
SURMHFWDEDQGRQPHQWDWDQ\GHFLVLRQSRLQW7KLVUHDOLVDWLRQH[SODLQVDOVRWKHORZYDOXHRI
WKH DEDQGRQPHQWRSWLRQLQWKH UHVXOWV RI WKH SUHYLRXV VHFWLRQ 7KH HVWLPDWHG *39 RI
WKH FDVH SURMHFW LV LQLWLDOO\ WKDW KLJK 086' WKDW RQO\ WKH IHZ PRVW DGYHUVH
RXWFRPHV ZDUUDQW SURMHFW DEDQGRQHPHQW 7KHUHE\ WKH SRVVLEOH VDYLQJV IURP DYRLGLQJ
WKRVHORVVHVUHPDLQVPDOO
Abandonment Optio
Value of the R&D Proj
MUSD (Including th
Volatility 35%
Volatility 70%
NPV
)LJXUH 6HQVLWLYLW\ LQ WKH YDOXDWLRQ RI WKH 5 ' SURMHFW ZLWK UHVSHFW WR *39 RI VDOHV XVLQJ WKH
139DSSURDFKDQGWKHUHDORSWLRQVDSSURDFKLQFOXGLQJWKHYDOXHRIWKHDEDQGRQPHQWRSWLRQ7KUHH
VHSDUDWH HVWLPDWHV IRU WKH DQQXDO YRODWLOLW\ RI *39 DUH XVHG LQ UHDO RSWLRQ
YDOXDWLRQ
7KHVLWXDWLRQLVYHU\GLIIHUHQWZKHQZHVWDUWUHGXFLQJWKHYDOXHRIWKH*39RIVDOHV,Q
WKLV FDVH WKH DEDQGRQPHQW RSWLRQ EHFRPHV YDOXDEOH HYHQ ZLWK PRGHUDWH HVWLPDWHV IRU
WKH YRODWLOLW\ 7KLV FDQ EH H[SODLQHG E\ QRWLFLQJ WKDW LI WKH LQLWLDO HVWLPDWH IRU WKH
XQGHUO\LQJDVVHWYDOXHLVFORVHWRWKHEUHDNHYHQOLQHHYHQVPDOOQHJDWLYHFKDQJHVLQWKH
VDOHVHVWLPDWHVMXVWLI\H[HUFLVLQJWKHRSWLRQWRDEDQGRQWKHSURMHFW0RUHRYHUZKHQWKH
YRODWLOLW\LQWKHVDOHVHVWLPDWHVLVKLJKDGYHUVHRXWFRPHVDUHPRUHSUREDEOHLQFUHDVLQJWKH
YDOXHRIWKHDEDQGRQPHQWRSWLRQ,QVKRUWWKHORZHUWKHXQGHUO\LQJDVVHWYDOXHDQGWKH
KLJKHUWKHYRODWLOLW\WKHKLJKHULVWKHYDOXHRIWKHDEDQGRQPHQWRSWLRQ6HH)LJXUH
Volatility 70%
Volatility 35%
Volatility 10%
)LJXUH 6HQVLWLYLW\ LQ WKH YDOXH RI WKH DEDQGRQPHQW RSWLRQ ZLWK UHVSHFW WR *39 RI VDOHV 7KUHH
$QLQWHUHVWLQJIDFWLVQRWHGZKHQWKHHVWLPDWHVIRUWKH*39RIVDOHVFRQWLQXHWRGHFOLQH
:KHQ DVVHW YDOXH IDOOV VXIILFLHQWO\ ORZ DFFRXQWLQJ IRU WKH YDOXH RI WKH DEDQGRQPHQW
RSWLRQ FDQ MXVWLI\ D JRGHFLVLRQ IRU WKH 5 ' SURMHFW DOWKRXJK WUDGLWLRQDO YDOXDWLRQ
VXJJHVWVSURMHFWDEDQGRQPHQW7KLVFDQEHREVHUYHGE\ORRNLQJEDFNWR)LJXUH$WD
FHUWDLQ OHYHO RI WKH XQGHUO\LQJ DVVHW YDOXH WKH WUDGLWLRQDO YDOXDWLRQ JRHV XQGHU WKH
EUHDNHYHQ OLQH VXJJHVWLQJ D QRJR GHFLVLRQ +RZHYHU E\ LQFOXGLQJ WKH YDOXH RI
PDQDJHULDO IOH[LELOLW\ WKH SUHVHQW YDOXH RI VDOHV PXVW IDOO PXFK IXUWKHU EHIRUH WKH
DEDQGRQPHQW GHFLVLRQ EHFRPHV RSWLPDO 0RUHRYHU WKH ORZHUERXQG IRU SURMHFW
FRQWLQXDWLRQGHSHQGVRQWKHHVWLPDWHIRUYRODWLOLW\WKDWLVXVHG6HH7DEOH
7DEOH/RZHUERXQGVLQWKH*39RIVDOHVWKDWLPSO\DJRGHFLVLRQIRUWKHSURMHFWDVVHWYRODWLOLW\LQ
EUDFNHWV
0HWKRG /RZHUERXQGIRUDJRGHFLVLRQ086'
139
529
529
529
)RUH[DPSOHLIWKH*39RIVDOHVLHWKHXQGHUO\LQJDVVHWYDOXHRIWKHFDVHVWXG\ZDV
EHWZHHQDQG086'LQVWHDGRIWKHDFWXDO086'139YDOXDWLRQZRXOG
LPSO\ DEDQGRQLQJ WKH SURMHFW +RZHYHU WKH UHDO RSWLRQVDSSURDFK ZRXOG VWLOO VXJJHVW
SURMHFWDFFHSWDQFH,IWKHXQGHUO\LQJDVVHWYDOXHZHUHWRGURSEHORZWKHORZHUERXQGRI
086'WKHUHDORSWLRQYDOXDWLRQZRXOGVXJJHVWSURMHFWDEDQGRQPHQW
,Q VXPPDU\ WKH RSWLRQ WR DEDQGRQ LQFUHDVHV WKH WRWDO YDOXH RI WKH SURMHFW
XQDPELJXRXVO\7KHYDOXHRIWKHDEDQGRQPHQWRSWLRQLQFUHDVHVZLWKKLJKHUYRODWLOLW\LQ
WKH XQGHUO\LQJ DVVHW YDOXH DQG ZLWK ORZHU FXUUHQW YDOXH RI WKH XQGHUO\LQJ DVVHW ,I WKH
FXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLVVXIILFLHQWO\ORZUHDORSWLRQYDOXDWLRQPD\VXJJHVW
FRQWLQXDWLRQRIWKHSURMHFWDOWKRXJK139YDOXDWLRQZRXOGLPSO\SURMHFWDEDQGRQPHQW
7KH*URZWK2SWLRQ
$OVR WKH YDOXH RI WKH IROORZRQ LQYHVWPHQW RSSRUWXQLW\ LV VHQVLWLYH ZLWK UHVSHFW WR
YRODWLOLW\LQWKHJURVVSUHVHQWYDOXHRIWKHHVWLPDWHGVDOHV ,W LV HYLGHQW IURP )LJXUH
WKDWLIWKHHVWLPDWHIRUDQQXDOYRODWLOLW\ULVHVDERYHDFHUWDLQOHYHO UHDORSWLRQYDOXDWLRQ
JLYHVDKLJKHUYDOXHIRUWKHJURZWKRSWLRQWKDQWKH139YDOXDWLRQGRHV
7KH VWDUWLQJ SRLQW IRU HDFK RI WKH JUDSKV LV WKH ORZHUERXQG RI WKH *39 RI VDOHV WKDW ZDUUDQWV
FRQWLQXDWLRQRIWKH5 'SURMHFWVHH7DEOH
7KHH[DFWYDOXHLV086'
7KLV´WKUHVKROGµYRODWLOLW\ZDVFDOFXODWHGWREH
Volatility in GPV, MUSD
)LJXUH6HQVLWLYLW\ZLWKUHVSHFWWRYRODWLOLW\LQWKHJURVVSUHVHQWYDOXHRIHVWLPDWHGVDOHV$FRQVWDQW
ILJXUHRI086'LVXVHGIRUWKH*39
7KHVLWXDWLRQEHFRPHVPRUHFRPSOLFDWHGZKHQZHDOORZIRUFKDQJHVLQWKHFXUUHQWYDOXH
RIWKHXQGHUO\LQJDVVHWVHH)LJXUHEHORZ7KH139DSSURDFKJLYHVKLJKHUYDOXDWLRQV
IRU WKH JURZWK RSWLRQ RQO\ EH\RQG D FHUWDLQ OHYHO RI WKH XQGHUO\LQJ DVVHW YDOXH ZKLFK
GHSHQGV RQ WKH IL[HG HVWLPDWH IRU YRODWLOLW\ 7KH KLJKHU WKH YRODWLOLW\ WKH ODUJHU WKH
XQGHUO\LQJ DVVHW YDOXH KDV WR EH LQ RUGHU IRU 139 YDOXDWLRQ WR UHDFK WKH UHDO RSWLRQ
YDOXDWLRQ6HH7DEOHEHORZ
7KHUHDORSWLRQYDOXDWLRQJLYHVWKHJURZWKRSWLRQDSRVLWLYHYDOXHQRPDWWHUKRZORZWKH
FXUUHQW YDOXH RI WKH XQGHUO\LQJ DVVHW LV 2Q WKH FRQWUDU\ 139 YDOXDWLRQ DVVLJQV D
QHJDWLYH YDOXH WR WKH JURZWK RSWLRQ EHORZ D FULWLFDO OHYHO 086' RI WKH
XQGHUO\LQJDVVHWYDOXH,QVKRUWLIWKHJURZWKRSWLRQLQWKHFDVHVWXG\KDVWKH*39RI
VDOHV EHORZ WKLV FULWLFDO OHYHO LWV LQFOXVLRQ LQ WKH WUDGLWLRQDO YDOXDWLRQ ZRXOG UHGXFH WKH
WRWDO YDOXH RI WKH SURMHFW +RZHYHU UHDO RSWLRQ YDOXDWLRQ RI WKH JURZWK RSWLRQ DOZD\V
LQFUHDVHVWKHWRWDOYDOXHRIWKHSURMHFWLUUHVSHFWLYHRIWKHHVWLPDWHIRUWKH*39RIVDOHV
7KLVGLIIHUHQFHVWHPVIURPWKHIDFWWKDWWKHUHDORSWLRQYDOXDWLRQFRUUHFWO\DFFRXQWVIRU
WKHPDQDJHULDODELOLW\RIQRWH[HUFLVLQJWKHJURZWKRSWLRQLQ\HDU
7KHFXUUHQWYDOXHRIWKHXQGHUO\LQJDVVHWLVFDOFXODWHGE\PXOWLSO\LQJWKHFXUUHQWYDOXHRIWKHRQJRLQJ
SURMHFW 086' E\ WKUHH ZHLJKWLQJ WKH UHVXOW E\ WKH WHFKQLFDO VXFFHVV SUREDELOLW\ DQG
GLVFRXQWLQJWKHUHVXOWIURP\HDUEDFNWR\HDU]HUR
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
Total Value of Follow
Investment Opportu
Volatility 70%
MUSD
NPV
Volatility 35%
100 Volatility 10%
175
220
300
399
500
5
Gross Present Value of Sales, MUSD
)LJXUH 6HQVLWLYLW\ LQ WKH YDOXDWLRQ RI WKH JURZWK RSWLRQ ZLWK UHVSHFW WR *39 RI VDOHV XVLQJ WKH
139DSSURDFK DQG WKH UHDO RSWLRQVDSSURDFK 7KUHH VHSDUDWH HVWLPDWHV IRU WKH
DQQXDOYRODWLOLW\RI*39DUHXVHGLQUHDORSWLRQYDOXDWLRQ
7DEOH(VWLPDWHVIRU*39RIVDOHVZKHUH139YDOXDWLRQDQGUHDORSWLRQYDOXDWLRQFRQYHUJH
&KDQJHVLQ2WKHU3DUDPHWHU9DOXHV
,WLVFOHDUWKDWFKDQJHVLQWKHHVWLPDWHG5 'LQYHVWPHQWFRVWVDIIHFWWKHYDOXHVRIERWK
UHDO RSWLRQV E\ UHGXFLQJ RU LQFUHDVLQJ WKH FXUUHQW YDOXH RI WKH SURMHFW ,I ZH DVVRFLDWH
UHGXFHGFRVWVZLWKKLJKHU*39RIVDOHVDQGYLFHYHUVDWKHUHVXOWVIURPWKHWZRSUHYLRXV
VXEVHFWLRQVFDQEHDSSOLHGGLUHFWO\
6HQVLWLYLW\DQDO\VLVDOVRUHYHDOVWKDWWKHFKRLFHRISHULRGVSHU\HDULQWKHELQRPLDOODWWLFH
GRHVQRWDIIHFWWKHYDOXHRIWKHDEDQGRQPHQWRSWLRQVLJQLILFDQWO\$OWKRXJKWKHFKRLFH
RIIRXUSHULRGVSHU\HDUPD\VHHPDUELWUDU\FKDQJLQJWKHQXPEHURISHULRGVIURPWR
SHU\HDUSURYLGHVQHDUO\VLPLODUUHVXOWVZLWKHYHU\FKRLFH6HH7DEOH
7DEOH9DOXHRIWKHDEDQGRQPHQWRSWLRQZLWKGLIIHUHQWQXPEHURIGHFLVLRQSRLQWVSHU\HDU$OORWKHU
SDUDPHWHUYDOXHVDUHNHSWFRQVWDQWDVDERYH
RISHULRGV\HDU
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
9DOXHRIWKHRSWLRQ
7RDEDQGRQ086'
,QSDUWLFXODUWKHRSWLRQWRDEDQGRQUHPDLQVYDOXDEOHHYHQZKHQWKHQXPEHURIGHFLVLRQ
SRLQWVLVUHGXFHGGUDVWLFDOO\
3UDFWLFDO,PSOLFDWLRQV
6XJJHVWLRQV
7KH VXJJHVWLRQV DULVLQJ IURP WKH SURMHFW YDOXDWLRQ DQG VHQVLWLYLW\ DQDO\VHV DUH
VWUDLJKWIRUZDUG WKH SURMHFW LV SURILWDEOH DQG EDVHG RQ PRQHWDU\ FRQVLGHUDWLRQV D JR
GHFLVLRQ VKRXOG EH PDGH %RWK WKH WUDGLWLRQDO DV ZHOO DV WKH RSWLRQWKHRUHWLF YDOXDWLRQ
VXSSRUW WKLV VXJJHVWLRQ )XUWKHUPRUH WKH LGHQWLILHG JURZWK RSWLRQ EULQJV DGGLWLRQDO
YDOXH WR WKH RQJRLQJ SURMHFW LUUHVSHFWLYH RI WKH YDOXDWLRQ DSSURDFK WKDW LV DSSOLHG
7KHUHIRUHWKHDYDLODELOLW\RIWKHJURZWKRSWLRQLQFUHDVHVWKHDWWUDFWLYHQHVVRIWKHFDVH
SURMHFW
7KH2SWLRQWR6HOO3URMHFWWR6HFRQG3DUW\
7KHYDOXHIURPDSURILWDEOHFDQGLGDWHPROHFXOHFDQEHH[WUDFWHGLQVHYHUDOZD\V2QHRI
WKHOHVVULVN\DOWHUQDWLYHVLVWRVKDUHWKHGHYHORSPHQWFRVWVDQGULVNVE\FRPPLWWLQJWRD
SDUWQHUVKLS ZLWK DQRWKHU SDUW\ DW VRPH VWDJH RI WKH GHYHORSPHQW 7KLV LV WHPSWLQJ
EHFDXVH WKH SRWHQWLDO IRU SURILW UHPDLQV ZKLOH WKH RUJDQLVDWRULDO UHVRXUFH UHTXLUHPHQWV
DUH UHGXFHG 0RUHRYHU LI WKH FRPSDQ\ LV DEOH WR GLYHUVLI\ LWV 5 ' SRUWIROLR DFURVV
VHYHUDOSURMHFWVDQGWKHUDSHXWLFDUHDVWKHRYHUDOOULVNLQHVVRIWKHFRPELQHGSRUWIROLRLV
UHGXFHG
+RZHYHU LQ RUGHU WR PD[LPL]H WKH H[SHFWHG UHYHQXHV XQGHU WKH FKRVHQ OHYHO RI WRWDO
ULVN LW LV HVVHQWLDO WKDW WKH SDUWQHUVKLSV RU VHOORXWV DUH SULFHG LQ D YDOXHPD[LPLPL]LQJ
PDQQHU7KHULVNDQGWKHH[SHFWHGUHWXUQVLQDQ\SURMHFWDUHOLQNHGDFFRUGLQJWRVWDQGDUG
SRUWIROLR WKHRU\ 7KH KLJKHU WKH VKDUH RI ULVN IRU 2ULRQ 3KDUPD LQ D SDUWQHUVKLS WKH
KLJKHUVKRXOGWKHH[SHFWHGVKDUHRIUHWXUQVEHIRU2ULRQ3KDUPD,QVKRUWWKHWLPLQJ
DQG´WKHIRUPµLHWKHULJKWVDQGWKHREOLJDWLRQVRIWKHFRQWUDFWVKRXOGEHVXLWHGWRWKH
QHHGV RI RWKHU RQJRLQJ 5 ' SURMHFWV 7KLV PHDQV EDODQFLQJ WKH VWUDWHJLF ILW WKH
RUJDQLVDWRULDO UHTXLUHPHQWV DQG WKH ULVNUHWXUQ OHYHO RI GLIIHUHQW SURMHFWV ZLWK RQH
DQRWKHU7KHSULFHLHWKHGRZQSD\PHQWVDQGWKHUR\DOWLHVRIDSDUWQHUVKLSLVGLUHFWO\
GHULYDEOH IURP WKH ILQDQFLDO SRWHQWLDO RI WKH SURMHFW DQG IURP WKH GLYLVLRQ RI ULVN
EHWZHHQWKHFRQWUDFWLQJSDUWLHV
7KHRQJRLQJ5 'SURMHFWVFDQEHVHHQDVSLHFHVRIVWRFNVZKLFKDIIHFWWKHULVNUHWXUQ
H[SHFWDWLRQV RI WKH 5 ' SRUWIROLR RI WKH FRPSDQ\ 2QFH WKH GHVLUHG ULVNOHYHO LV
FKRVHQ LW LV D TXHVWLRQ RI HIILFLHQW FRQWUDFW GHVLJQ LQ SDUWQHUVKLSV WKDW WKH H[SHFWHG
UHWXUQVIURPWKHRYHUDOOSURMHFWDQGSDUWQHUVKLSSRUWIROLRUHPDLQDWWKHLUPD[LPXPOHYHO
LHRQWKH3DUHWRIURQWLHU
'LVFXVVLRQRQ&DVH6WXG\
7KH SXUSRVH RI WKH FDVH VWXG\ ZDV WR LGHQWLI\ UHDO RSWLRQV LQ D UHDO SKDUPDFHXWLFDO
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$Q$SSOLFDWLRQWRD&DVH6WXG\
SURMHFW DQG WR YDOXH WKHP TXDQWLWDWLYHO\ 7ZR UHDO RSWLRQV ZHUH LGHQWLILHG WKHLU
SDUDPHWHUVZHUHHVWLPDWHGDQGVHSDUDWHPRGHOVZHUHEXLOWIRUWKHYDOXDWLRQ7KHRSWLRQ
WRDEDQGRQZDVYDOXHGXVLQJDGLVFUHWHWLPHELQRPLDOODWWLFHDQGWKHJURZWKRSWLRQZDV
YDOXHGXVLQJDNQRZQVROXWLRQIRUPXODIRUDFRQWLQXRXVWLPHSDUWLDOGLIIHUHQWLDOHTXDWLRQ
JRYHUQLQJ WKH RSWLRQ YDOXH ([SOLFLW FDUH ZDV WDNHQ WR NHHS WKH ORJLF WUDFWDEOH DQG WR
DUJXHIRUWKHVXLWDELOLW\RIVLPSOLILFDWLRQVDQGSDUDPHWHUHVWLPDWRUV$QRWKHUIRUPXODWR
GHULYHDYDOXHIRUWKHJURZWKRSWLRQZDVDOVRFRQVLGHUHGEXWZDVUHMHFWHGGXHWRDORVVRI
WUDQVSDUHQF\LQWKHLPSOHPHQWDWLRQ 7KHDOWHUQDWLYHFRQVLVWHGRIWKHYDOXDWLRQRID
WZRVWDJHG FRPSRXQG RSWLRQ WKDW ZRXOG KDYH PRUH H[DFWO\ FDSWXUHG WKH YDOXH LQ WKH
JURZWK RSWLRQ $ VLPSOLI\LQJ DVVXSWLRQ LQ WKH %ODFN 6FKROHV IRUPXOD LV WKDW WKH
GHFLVLRQSRLQW WR H[HUFLVH WKH RSWLRQ LV GXH RQO\ DW RQH GHFLVLRQ SRLQW LQ VHYHQ \HDUV·
WLPH ,Q UHDOLW\ WKH GHFLVLRQPDNHU KDV WKH DELOLW\ WR H[HUFLVH WKH RSWLRQ WR SURFHHG DW
HYHU\ GHFLVLRQSRLQW GXULQJ WKH FOLQLFDO GHYHORSPHQW RI WKH RQJRLQJ 5 ' SURMHFW
7KHUHIRUHWKHJURZWKRSWLRQLVLQIDFWDPXOWLVWDJHGFRPSRXQGRSWLRQZKHUHWKHILQDO
GHFLVLRQZKHWKHUWRWDNHDGYDQWDJHRIWKHIROORZRQLQYHVWPHQWRSSRUWXQLW\LVSUHFHHGHG
E\ VHYHUDO RSWLRQV WR SURFHHG ZLWK WKH RQJRLQJ SURMHFW *HVNH·V IRUPXOD ZRXOG KDYH
LQFOXGHGWZRGHFLVLRQSRLQWVLQWKHYDOXDWLRQLQVWHDGRIRQH
$V GHPRQVWUDWHG E\ WKH VHQVLWLYLW\ DQDO\VHV UHDO RSWLRQ YDOXDWLRQ GLG QRW SURYLGH
VLJQLILFDQWO\GLIIHUHQWUHVXOWVFRPSDUHGWRWKHWUDGLWLRQDOYDOXDWLRQWRROV+RZHYHUUHDO
RSWLRQYDOXDWLRQVWLOOEULQJVDVWURQJVXSSRUWLYHHOHPHQWLQWRILQDQFLDOSURMHFWHYDOXDWLRQ
DVLWVWUHQJKWHQVDQGFODULILHVWKHUHVXOWVDFKLHYHGE\VLPSOH139PHWKRGV7KHUHVXOWV
DUHPRUHHDVLO\FRPPXQLFDWHGZKHQVXSSRUWLQJJUDSKVRQWKHLPSDFWRIFKDQJHVLQNH\
SDUDPHWHU YDOXHV FDQ EH SUHVHQWHG ,Q WKLV FDVH VWXG\ LW ZDV VKRZQ WKDW WKH H[SHFWHG
YDOXH RIWKHSRVLWLYHFDVKIORZVFDQGHFUHDVHVLJQLILFDQWO\EHIRUHWKHSURILWDELOLW\RI WKH
SURMHFWFDQEHTXHVWLRQHG0RUHRYHUWKHYRODWLOLW\LQVDOHVHVWLPDWHVGRHVQRWGHFUHDVH
WKHYDOXHRIWKHSURMHFWEHFDXVHWKHRSWLRQWRDEDQGRQLVDYDLODEOHDQGEHFDXVHYRODWLOLW\
DIIHFWVWKHYDOXHRIWKHJURZWKRSWLRQSRVLWLYHO\
7KHVHQVLWLYLW\DQDO\VHVDOVRUHYHDOHGWKHFRPSOHPHQWDU\UHODWLRQRIUHDORSWLRQYDOXDWLRQ
ZLWK UHVSHFW WR WKH WUDGLWLRQDO YDOXDWLRQ PHWKRGV 7KH SUHVHQW YDOXH RI WKH XQGHUO\LQJ
DVVHWZDVFDOFXODWHGE\RQHRIWKHWUDGLWLRQDOPHWKRGV,QWKLVVHQVHWKHVWDUWLQJSRLQWLQ
ERWK DSSURDFKHV LV LGHQWLFDO EXW WKH YLHZSRLQW LQWR WKH IXWXUH LV GLIIHUHQW 7KH UHVXOWV
IURPWKHYDOXDWLRQRIERWKRSWLRQVZHUHDOPRVWLGHQWLFDOZKHQWKHUHZDVOLWWOHYDOXHLQ
WKHDELOLW\WRDGMXVWWRXQFHUWDLQFLUFXPVWDQFHVLQWKHIXWXUH)RULQVWDQFHZKHQWKHJURVV
SUHVHQW YDOXH RI VDOHV ZDV DVVXPHG WR EH KLJK RSWLRQWKHRUHWLF ORJLF GLG QRW SURYLGH
DGGLWLRQDOLQVLJKWVLQFHPDQDJHULDOIOH[LELOLW\ZDVXVHOHVVWKH5 'ZRXOGSURFHHGXQGHU
DOPRVW DQ\ FLFXPVWDQFHV 7KLV LV WKH NLQG RI HQYLURQPHQW ZKHUH GHWHUPLQLVWLF 139
FDOFXODWLRQV ZRUN EHVW VR LW LV RQO\ QDWXUDO WKDW RSWLRQWKHRUHWLF YDOXDWLRQ VKRXOG
FRQYHUJHZLWKWKHP+RZHYHUDVVRRQDVWKH*39RIVDOHVZDVUHGXFHGWKHPDQDJHULDO
IOH[LELOLW\ EHFDPH YDOXDEOH DQG WKH UHVXOWV IURP RSWLRQWKHRUHWLF YDOXDWLRQ EHJDQ WR
GLYHUJH IURP WKRVH RI WKH WUDGLWLRQDO 139YDOXDWLRQ ,Q VXPPDU\ WKH FRPSDULVRQ
EHWZHHQ WKH UHVXOWV IURP GLIIHUHQW PHWKRGV SURYLGHG D ORW RI DQDO\WLFDO PLOHDJH DQG
DGGLWLRQDOXQGHUVWDQGLQJLQWRWKHILQDQFLDOHYDOXDWLRQRIDQ5 'SURMHFW
*HVNH57KH9DOXDWLRQRI&RPSRXQG2SWLRQV-RXUQDORI)LQDQFLDO(FRQRPLFV9ROSS
+XOO- 2SWLRQV)XWXUHVDQG2WKHU'HULYDWLYH6HFXULWLHV(QJOHZRRG&OLIIV 1- 3UHQWLFH+DOO
HGLWLRQSS
QG
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²*HQHUDO'LVFXVVLRQ
*(1(5$/',6&866,21
&RQFOXVLRQV
7UDGLWLRQDO LQYHVWPHQW DSSUDLVDO SURFHGXUHV GR QRW H[SOLFLWO\ DGGUHVV WKH YDOXH RI UHDO
RSWLRQVHPEHGGHGLQ5 'SURMHFWV6LQFHRSWLRQYDOXHLVKLJKHVWLQORQJWHUPDQGKLJK
ULVN LQYHVWPHQWV VXFK DV SKDUPDFHXWLFDO 5 ' WKH LQWURGXFWLRQ RI RSWLRQWKHRUHWLF
YDOXDWLRQWRROVLVOLNHO\WRHQKDQFHWKHDFFXUDF\RIILQDQFLDOSURMHFWHYDOXDWLRQ
7KLVWKHVLVEXLOGVRQWKHIROORZLQJWKUHHWKHPHV)LUVWWKHORJLFRIUHDORSWLRQVGRHVQRW
UHSODFHWKHHVWDEOLVKHGYDOXDWLRQWRROVE\DQHZVHWRIFRPSOH[PDWKHPDWLFDOIRUPXODH
,QVWHDG WKH FRUH UHDOLVDWLRQ LV WKDW UHDO RSWLRQV H[LVW DQG WKHLU YDOXH FDQ DIIHFW WKH LQYHVWPHQW
GHFLVLRQVFRQFHUQLQJDVSHFLILF5 'SURMHFW7KLVLVDFKDOOHQJHLQLWVHOIVLQFHHPSLULFDOHYLGHQFH
VKRZV WKDW ´JXW IHHOLQJµ VHOGRP DFNQRZOHGJHV WKH H[LVWHQFH DQG WKH YDOXH RI UHDO
RSWLRQV
6HFRQGLQFOXGLQJWKHYDOXHRIUHDORSWLRQVLQSURMHFWHYDOXDWLRQLQYDULDEO\LQFUHDVHVWKHWRWDOYDOXHRIDQ
5 'SURMHFW%\DVVXPSWLRQWKHORVVHVIURPRZQLQJDQRSWLRQDUHDOZD\VDW]HURVLQFHLI
WKHRSWLRQLVZRUWKOHVVLWLVOHIWXQH[HUFLVHG,QWKHFRQWH[WRISKDUPDFHXWLFDO5 'WKLV
PHDQVWKDWWKHGHYHORSPHQWVKRXOGEHVWDUWHGZLWKPRUHFDQGLGDWHPROHFXOHVVLQFHUHDO
RSWLRQYDOXDWLRQVHHVDGGLWLRQDOYDOXHLQWKHP+RZHYHUWKHWRWDOQXPEHURIPROHFXOHV
LQWKHSLSHOLQHVKRXOGVWD\WKHVDPHRQDYHUDJHDVPRUHSURMHFWVZLOOEHDEDQGRQHGDVD
UHVXOW RI QRW H[HUFLVLQJ WKH RSWLRQ WR SURFHHG +LJK RSWLRQWKHRUHWLF YDOXDWLRQ RI
PDUJLQDOSURMHFWVZDVLOOXVWUDWHGE\PDNLQJK\SRWKHWLFDOFKDQJHVWRWKHSDUDPHWHUYDOXHV
RIWKHFDVHSURMHFW
7KLUGWKHFKRLFHIRUWKHPRVWVXLWDEOHYDOXDWLRQPHWKRGIRUDVLQJOHUHDORSWLRQRUIRUWKHYDOXHRIDQ
HQWLUH5 'SURMHFWGHSHQGVRQIDFWRUVWKDWDUHHQGRJHQRXVWRWKHRSWLRQRUSURMHFWXQGHUVWXG\2QHRI
WKHPDLQFRQFOXVLRQVIURPWKHFDVHVWXG\ZDVWKDWWKHUHVXOWVIURPUHDORSWLRQYDOXDWLRQ
FRQYHUJHZLWKWKRVHRIWKHWUDGLWLRQDOYDOXDWLRQZKHQWKHUHLVOLWWOHYDOXHLQPDQDJHULDO
IOH[LELOLW\LQWKHIXWXUH,PSRUWDQWIDFWRUVDIIHFWLQJWKHFKRLFHRIWKHYDOXDWLRQ PHWKRG
DUHWKHVL]HRIHVWLPDWHGVDOHVWKHDPRXQWDQGVWUXFWXUHRIWRWDOXQFHUWDLQW\HPEHGGHGLQ
WKH SURMHFWDQGWKHUHTXLUHGDFFXUDF\EDODQFHGZLWKWKH DPRXQW RI WLPH DQG UHVRXUFHV
DYDLODEOH IRU WKH YDOXDWLRQ 6XJJHVWLRQV IRU WKH FKRLFH RI DQ DSSURSULDWH YDOXDWLRQ
PHWKRGZHUHSUHVHQWHGLQ)LJXUHS
/RRNLQJ EDFN DW WKH UHVHDUFK SUREOHPV VWDWHG LQ FKDSWHU S ZH FDQ FRQFOXGH WKDW
DGHTXDWHDQVZHUVWRHDFKTXHVWLRQZHUHSUHVHQWHGLQWKHWKHVLV7KHORJLFEHKLQGRSWLRQ
WKHRUHWLF YDOXDWLRQ KDV EHHQ GLVFXVVHG ² TXLWH ULJRURXVO\ DW FHUWDLQ VHFWLRQV ² DQG
FRQWUDVWHG ZLWK WKH WUDGLWLRQDO YDOXDWLRQ PHWKRGV WKURXJK SUHVHQWLQJ D K\SRWKHWLFDO
H[DPSOH 6HYHUDO GLIIHUHQW UHDO RSWLRQV ZHUH VWXGLHG DQG WKH PRVW UHOHYDQW RQHV ZHUH
LGHQWLILHG IRU IXUWKHU H[DPLQDWLRQ LQ WKH FRQWH[W RI WKH FDVH SURMHFW )LQDOO\ WZR UHDO
RSWLRQVZHUHYDOXHGTXDQWLWDWLYHO\ZLWKGLIIHUHQWPHWKRGVDQGWKHLPSDFWRIWKHUHVXOWV
RQ SURMHFW PDQDJHPHQW DQG GHFLVLRQPDNLQJ ZDV GLVFXVVHG $OO WKH ZD\ WKURXJK
HPSKDVLV ZDV ODLG RQ WKH FRPSDULVRQ EHWZHHQ WKH RSWLRQWKHRUHWLF DQG WKH WUDGLWLRQDO
YDOXDWLRQPHWKRGVDQGWKHVWUHQJWKVDQGZHDNQHVVHVRIWKHUHDORSWLRQ²DSSURDFKZHUH
+RZHOO6'-lJOH$-/DERUDWRU\(YLGHQFHRQ+RZ0DQDJHUV,QWXLWLYHO\9DOXH5HDO*URZWK
H[DPLQHGDQGDQDO\VHGXQGHUGLIIHUHQWFLUFXPVWDQFHV
5HOLDELOLW\DQG9DOLGLW\
7KH UHOLDELOLW\ RI VFLHQWLILF UHVHDUFK PHDQV LWV DELOLW\ WR PLQLPL]H UDQGRPQHVV LQ WKH
UHVXOWV ,QWKHFRQWH[WRIWKHWKHVLVWKLVPHDQVWKDWWKHUHVXOWVIURPWKHOLWHUDWXUHDQG
FDVHVWXG\ VKRXOG EH LGHQWLFDO LI UHSHUIRUPHG XQGHU LGHQWLFDO FLUFXPVWDQFHV 7KH
FRQFOXVLRQVGUDZQIURPWKHOLWHUDWXUHVXUYH\DUHERXQGWRLQFOXGHDGHJUHHRIVXEMHFWLYH
LQWHUSUHWDWLRQ+RZHYHUWKHEUHDGWKRIUHIHUHQFHVUHGXFHVWKLVELDVWRDFHUWDLQH[WHQW
$VWRWKHVSUHDGVKHHWPRGHOLWVUHOLDELOLW\FDQEHTXHVWLRQHGPRUHVHYHUHO\$QXPEHURI
DVVXPSWLRQVZHUHPDGHLQRUGHUWRVLPSOLI\WKHFRQVWUXFWLRQRIWKHPRGHO1RWPDQ\RI
WKHVHDVVXPSWLRQVZHUHEDVHGRQWKHRU\EXWZHUHPDGHWRHQVXUHWUDFWDELOLW\DQGHDVHLQ
FDOFXODWLRQV )RU LQVWDQFH WKH DVVXPSWLRQ WKDW WKH PDUNHW IRU WKH JURZWK RSSRUWXQLW\
ZDVWKUHHWLPHVODUJHUWKDQWKDWRIWKHRQJRLQJSURMHFWFRXOGKDYHEHHQFKDQJHGZKLFK
ZRXOG KDYH DIIHFWHG WKH UHVXOWV ,Q WKLV UHVSHFW WKH UHOLDELOLW\ RI WKH FDVHVWXG\ VXIIHUV
VRPHZKDW IURP WKH DUELWUDULQHVV LQ VRPH DVVXPSWLRQV +RZHYHU WKH QHHG WR PDNH
DVVXPSWLRQVLVQRWDSLWIDOOSHUVHUHOLDELOLW\UHTXLUHVRQO\WKDWVDPHDVVXPSWLRQVOHDGWR
VDPH UHVXOWV ZKHQ FDOFXODWLRQV DUH UHSHUIRUPHG 7KLV HVVHQWLDOO\ YDOLGDWHV WKH
PHWKRGRORJ\XVHG
7KHUHOLDELOLW\RIWKHVSUHDGVKHHWPRGHOLVVWUHQJKWHQHGE\WKHLQWXLWLYHQHVVRIWKHUHVXOWV
DQGVHQVLWLYLW\DQDO\VHV,QWHUSUHWDWLRQRIWKHSHUIRUPHGVHQVLWLYLW\DQDO\VHVVXSSRUWVWKH
UHOLDELOLW\RIWKHFDOFXODWLRQVEHFDXVHWKHUHVXOWVEHKDYHDVVXJJHVWHGE\WKHWKHRU\)RU
H[DPSOHZKHQYRODWLOLW\LQDVVHWYDOXHDSSURDFKHV]HURUHDORSWLRQYDOXDWLRQDSSURDFKHV
WKH VWDWLF QHW SUHVHQW YDOXDWLRQ WKH 7KH FRPSDUDWLYH UHOLDELOLW\ RI WKH PRGHO LV DOVR
VLJQLILFDQWEHFDXVHWKHUHVXOWVDUHDOLJQHGZLWKWKRVHUHDFKHGE\WKHWUDGLWLRQDOYDOXDWLRQ
PHWKRGV,QVKRUWWKHUHOLDELOLW\RIERWKPHWKRGRORJLHVLVVWUHQJWKHQHGDVWKHLU UHVXOWV
VXSSRUWHDFKRWKHU
7KHUHOLDELOLW\RISDUDPHWHUHVWLPDWHVFDQEHSURYHGE\WKHH[KDXVWLYHUHYLHZRIDYDLODEOH
HVWLPDWRUV 6HYHUDO HVWLPDWRUV ZHUH SUHVHQWHG DQG WKH FKRLFH IRU HDFK SDUDPHWHU ZDV
DUJXPHQWHG DOEHLW TXDOLWDWLYHO\ 7KH DFWXDO SDUDPHWHU YDOXHV ZHUH ´VDQLW\FKHFNHGµ E\
FDVHFRPSDQ\H[SHUWVZKLFKIXUWKHUVWUHQJWKHQVWKHUHOLDELOLW\RIHVWLPDWRUV+RZHYHU
VLPSOLI\LQJDVVXPSWLRQVZHUHPDGHKHUHWRR)RUH[DPSOHGLYLGHQG\LHOGZDVDVVXPHG
WREH]HURLQERWKUHDORSWLRQV
7KH YDOLGLW\ RI VFLHQWLILF UHVHDUFK PHDQV LWV DELOLW\ WR VWXG\ DQG PHDVXUH ZKDW LW LV
VXSSRVHG WR VWXG\ DQG PHDVXUH %\ DQG ODUJH ZH FDQ FRQFOXGH WKDW WKH UHVXOWV DQG
FRQFOXVLRQVRIWKHWKHVLVDUHYDOLGVLQFHWKHREMHFWLYHZDVWRLQWURGXFHDQGLPSOHPHQWD
QRYHO DQDO\WLFDO DSSURDFK LQWR ILQDQFLDO 5 ' SURMHFW HYDOXDWLRQ LQ WKH SKDUPDFHXWLFDO
LQGXVWU\ $OVR WKH FKRLFH RI FDVHSURMHFW ZDV YDOLG EHFDXVH UHDO RSWLRQV FRXOG EH
LGHQWLILHGIURPLW7KHGLIIHUHQWDVSHFWVLQWKHUHDORSWLRQVDSSURDFKZHUHGLVFXVVHGDQG
VSHFLILFQXPHULFDOYDOXHVIRUWKHUHDORSWLRQVLQWKHFDVHVWXG\ZHUHGHULYHG2QDPRUH
GHWDLOHGOHYHOWKRXJKWKHYDOLGLW\RIWKHWKHVLVEHFRPHVPRUHFRPSOLFDWHG(VSHFLDOO\WKH
SUHGLFWLRQ YDOLGLW\ LH WKH DELOLW\ WR SUHGLFW WKH ILQDQFLDO SRWHQWLDO DFFXUDWHO\ RI WKH FDVH
VWXG\FDQQRWEHVXSSRUWHGZLWKDQ\SDVWGDWD,QDQLGHDOVLWXDWLRQZHZRXOGKDYHKDG
-lUYHQSll(.RVRQHQ.,QWURGXFWLRQWR6FLHQWLILF0HWKRGVDQG6FLHQWLILF5HVHDUFK+HOVLQNL
8QLYHUVLW\RI7HFKQRORJ\(VSRRSS
LELGSS
VLPLODUSURMHFWLRQVPDGHIRUSDVWSURMHFWVWRJHWKHUZLWKWKHLUUHDOLVHGVDOHVDQGFRVWVGDWD
:LWKWKDWGDWDZHZRXOGKDYHEHHQDEOHWRPHDVXUHWKHH[SRVWDFFXUDF\RIWKHPRGHODQG
HVWLPDWH D PRUH DFFXUDWH DQG UHOLDEOH UDQJH IRU GLIIHUHQW SDUDPHWHU YDOXHV 3RVVLEO\ D
QHHG IRU VRPH UDGLFDO FKDQJHV LQ WKH FRQVWUXFWLRQ RI WKH PRGHO ZRXOG KDYH EHHQ
LGHQWLILHG,WVKRXOGEHVWUHVVHGWKDWGLIIHUHQWPRGHOVWUXFWXUHVFDQUHVXOWLQVXEVWDQWLDOO\
GLIIHUHQWUHVXOWV +RZHYHUWKLVSRVVLELOLW\IRUFDOLEUDWLRQZDVPDGHLPSRVVLEOHE\WKH
QRQH[LVWHQFH RI DQ\ SDVW GDWD 0D\EH WKH FDOFXODWLRQV PDGH IRU WKLV FDVH SURMHFW FDQ
VHUYHDVDEHQFKPDUNWKDWFDQEHXVHGWRFDOLEUDWHWKHPRGHOIXUWKHUDQGWRHQDEOHPRUH
DFFXUDWH SURMHFWLRQV IRU IXWXUH SURMHFWV RI WKH FDVH FRPSDQ\ ,Q DQ\ FDVH ZLWKRXW
VXSSRUWLQJSDVWGDWDDFULWLFDOUHDGHUFRXOGODEHOWKHUHVXOWVDQGFRQFOXVLRQVRIWKHWKHVLV
DVDQRWKHUH[DQWHSURMHFWLRQLQWRWKHIXWXUH
5LVN$QDO\VLV
7KHUH DUH VHYHUDO FRQFHUQV LQ WKH DGRSWLRQ DQG LQ WKH LPSOHPHQWDWLRQ RI WKH UHDO
RSWLRQVDSSURDFK LQWR SURMHFW HYDOXDWLRQ 7KH SUHFLVLRQ RI RSWLRQ YDOXH FDOFXODWLRQ LV
LOOXVRU\ WR VRPH H[WHQW H[FHSW IRU WKH VLPSOHVW RI RSWLRQV FDOFXODWLRQ UHTXLUHV IDU
UHDFKLQJ DVVXPSWLRQV DQG HVWLPDWHV 7KLV PHDQV WKDW WKH UHVXOWV DUH VXVFHSWLEOH WR
PLVXVH DQG PLVLQWHUSUHWDWLRQ DQG WKH UHTXLUHG OHYHO RI PDWKHPDWLFV WR FDUU\ RXW WKH
FDOFXODWLRQVFDQDFFHQWXDWHWKLVWHQGHQF\
$QRWKHUVWXPEOLQJEORFNPD\EHWKHUHTXLUHGGLVFLSOLQHLQWKHGHFLVLRQPDNLQJURXWLQHV
LQRUGHUWRDFWDFFRUGLQJWRWKHVXJJHVWLRQVRIWKHWKHRU\7RSXWLWVLPSO\WKHFRPSDQ\
KDVWRZDONDZD\IURPDSURMHFWLIWKDW·VWKHFDVHDFFRUGLQJWRWKHQXPEHUV+RZHYHU
WKHUH LV DQ LQHUWLD ZRUNLQJ WRZDUGV SUHVHUYLQJ WKH VWDWXV TXR DV VXJJHVWHG E\ VHFWLRQ
SS 7KH VXQN FRVWV KDYH WR EH FRQVLGHUDEOH DQG WKH IXWXUH SURVSHFWV KDYH WR
ORRNYHU\QHJDWLYHEHIRUHDQDEDQGRQPHQWGHFLVLRQLVPDGHHVSHFLDOO\LQODWWHUVWDJHVRI
FOLQLFDO GHYHORSPHQW 7KLV WHQGHQF\ FDQ EH DVVXPHG WR EH HYHQ VWURQJHU LQ D VPDOO
FRPSDQ\ VXFK DV WKH FDVH FRPSDQ\ ZKHUH WKH WRWDO QXPEHU RI RQJRLQJ SURMHFWV LV
UHODWLYHO\ VPDOO ,I RQO\ RQH RI WKH IHZ SURMHFWV VKRXOG EH DEDQGRQHG WKHUH H[LVWV
RUJDQLVDWRULDO GHPDQGV VXJJHVWLQJ WKDW WKH SURMHFW EH NHSW DOLYH 7KHUHIRUH WKH
HIIHFWLYH YDOXH RI WKH DEDQGRQPHQW RSWLRQ LV QRW DV KLJK DV LW WKHRUHWLFDOO\ VKRXOG EH
VLQFH VRPH ´DEDQGRQPHQW FRVWVµ DUH SUHVHQW LQ DQ\ DEDQGRQPHQW GHFLVLRQ %DVHG RQ
WKLVGLVFXVVLRQWKHUHDORSWLRQVDSSURDFKLIDFFHSWHGKDVWREHLPSOHPHQWHGZLWKFDUH
DQGXQGHUVWDQGLQJ
0RUHRYHUWKHUHH[LVWVDULVNRIRYHUYDOXDWLRQZKHQLGHQWLI\LQJUHOHYDQWJURZWKRSWLRQV
HPEHGGHG LQ DQ 5 ' SURMHFW ,W LV WHPSWLQJ IRU WKH SURMHFW FKDPSLRQ DQG RWKHU
DGYRFDWHV WR UDLVH WKH DWWUDFWLYHQHVV RI WKHLU SURMHFW E\ LGHQWLI\LQJ D OHDJXH RI JURZWK
RSWLRQVWKDWSRVVHVVDGGLWLRQDO´KLGGHQµYDOXH+RZHYHUWKHGHFLVLRQPDNHUVVKRXOGWU\
WR VHH WKURXJK WKLV DQG WU\ WR EDODQFH WKH SRWHQWLDO LQ WKRVH JURZWK RSWLRQV ZLWK WKH
SRWHQWLDO LQ DOWHUQDWLYH LQYHVWPHQW RSSRUWQLWLHV (VSHFLDOO\ IRU D VPDOO FRPSDQ\ WKH
H[HUFLVHRIDJURZWKRSWLRQLVXVXDOO\DOVRDVWUDWHJLFPRYHWKDWSURKLELWVLQYHVWPHQWWR
+XFK]HUPHLHU$/RFK&+(YDOXDWLQJ5 '3URMHFWVDV5HDO2SWLRQV:K\0RUH9DULDELOLW\
,V1RW$OZD\V%HWWHU:RUNLQJ3DSHU,16($')RQWDLQHEOHDX
6KDUS'-8QFRYHULQJWKH+LGGHQ9DOXHLQ+LJK5LVN,QYHVWPHQWV6ORDQ0DQDJHPHQW5HYLHZ
6XPPHUSS
7KLV K\SRWKHWLFDO FRQFOXVLRQ LV VWURQJO\ VXSSRUWHG E\ HPSLULFDO IDFWV RXW RI WKH SURSULHWDU\ 5 '
SURMHFW RI WKH FDVH FRPSDQ\ HYHU DUH RQJRLQJ KDYH EHHQ WHUPLQDWHG DQG KDYH EHHQ
ILQDOLVHG7KHVXFFHVVUDWHRIWKH5 'DFWLYLWLHVLVWKHUHIRUHDERYHWKHLQGXVWU\DYHUDJHE\DZLGHPDUJLQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²*HQHUDO'LVFXVVLRQ
,QVXPPDU\DOWKRXJKWKHSUHVHQWHGWKHRU\DQGWKHUHVXOWVIURPWKHFDVHVWXG\SURYLGH
XVHIXO JXLGHOLQHV IRU SURMHFW PDQDJHPHQW WKH WDVN RI FDUU\LQJ WKURXJK WKH LPSOLHG
DFWLRQVLQSUDFWLFHUHTXLUHVRUJDQLVDWRULDOGLVFLSOLQHHIILFLHQF\DQGXQGHUVWDQGLQJRIWKH
DSSOLHGYDOXDWLRQPHWKRGV
/LPLWDWLRQVRIWKH5HDO2SWLRQV0HWKRGRORJ\
7KLV VHFWLRQ DGGUHVVHV FRQFHSWXDO REVWDFOHV ZKHQ DVVHVVLQJ WKH ERXQGDULHV RI WKH UHDO
RSWLRQVDSSURDFK :KHUHDV WKH SUHYLRXV VHFWLRQ FRQFHQWUDWHG RQ WKH ULVNV LQ WKH
DGRSWLRQDQGWKHLPSOHPHQWDWLRQRIWKHPHWKRGRORJ\WKLVVHFWLRQGHDOVZLWKLVVXHVWKDW
PD\LQKLELWWKHXVHRIWKHPHWKRGRORJ\DOWRJHWKHU7KHLVVXHVLQWKLVVHFWLRQDUHVHSDUDWH
IURP WKH WKHRUHWLFDO SUREOHPV DVVRFLDWHG ZLWK WKH RSWLRQWKHRUHWLF YDOXDWLRQ WRROV RI
FKDSWHU
(IIHFWRI&RPSDQ\6L]HRQ,QYHVWPHQW3ROLF\
$OWKRXJKWKHIDPRXV)LVKHUVHSDUDWLRQWKHRUHP DOORZVWKHPDQDJHUVRIDFRPSHWLWLYH
ILUPWRPDNHLQYHVWPHQWVUHJDUGOHVVRIWKHSUHIHUHQFHVRIWKHRZQHUVRIWKHILUPUHDO
OLIH FDSLWDO EXGJHWLQJ GHFLVLRQV VHOGRP IROORZ WKH UXOH RI ULVNQHXWUDO SURILW
PD[LPL]DWLRQ$V/XHQEHUJHU SXWVLWULVNQHXWUDOLW\RIGHFLVLRQPDNHUVLVDVWURQJDQG
RIWHQDQXQUHDOLVWLFDVVXPSWLRQ7KLVLVWUXHLQSKDUPDFHXWLFDO5 'EHFDXVHWKHVL]HRI
WKH DYHUDJH LQYHVWPHQW LV ODUJH ,Q IDFW LI WKH FXPXODWLYH LQYHVWPHQW FRVWV DVVRFLDWHG
ZLWKDVLQJOHSURMHFWIRUPDVXEVWDQWLDOIUDFWLRQRIFRPSDQ\HTXLW\ULVNQHXWUDOLQYHVWLQJ
LVQRORQJHUDYDOLGDVVXPSWLRQ ,QVWHDGGHFLVLRQPDNHUVDUHULVNDYHUVHEHFDXVHWKH\
DUHDIUDLGRIWKHDGYHUVHHIIHFWVRISRVVLEO\XQSURILWDEOHLQYHVWPHQWV7KLVSKHQRPHQRQ
FRXOG H[SODLQ WKH ODUJH VL]H ² LH WKH FULWLFDO PDVV RI SKDUPDFHXWLFDO FRPSDQLHV DV D
PHDQVRIVWULYLQJIRUULVNQHXWUDOLW\LQRUGHUWREHDEOHWRFRPPLWWKHKXJH5 'FRVWV
LQWRWKHPRVWSURILWDEOHSURMHFWV
0DQDJHULDO,QFHQWLYHV
$QRWKHUSUDFWLFDOFDYHDWOLHVLQWKHVWUXFWXUHDQGLQWKHFXOWXUHRIWKHFRPSDQ\KROGLQJ
WKHUHDORSWLRQ6LQFHWKHWKHRU\FDOOVIRUDFWLYHLQLWLDOLVDWLRQVDQGDEDQGRQPHQWVRIQHZ
DQG H[LVWLQJ SURMHFWV WKH RUJDQLVDWLRQ KDV WR EH FDSDEOH RI DFWLQJ DFFRUGLQJO\ ,I WKH
PDQDJHULDO LQFHQWLYHV DUH VWUXFWXUHG WR IDYRXU LQYHVWPHQWV LQ ORZULVN DOWHUQDWLYHV WKH
KLJKULVN SURMHFWV ZLWK WKH PRVW YDOXDEOH UHDO RSWLRQV HPEHGGHG LQ WKHP DUH VHOGRP
VHOHFWHG6LPLODUO\LIWKHRUJDQLVDWLRQFRQVLGHUVWKDWLWLVKDUPIXOHJGXHWRHIIHFWVRQ
FRPSDQ\PRUDOHWRDEDQGRQDQHVWDEOLVKHGSURMHFWWKHGHFLVLRQWRVWRSEHFRPHVPRUH
7KLVYLHZZDVVXSSRUWHGE\6DLOD0LHWWLQHQ/lKGH%XVLQHVV'HYHORSPHQW2ULRQ3KDUPD
6HH IRU H[DPSOH &RSHODQG 7 $ :HVWRQ - ) )LQDQFLDO 7KHRU\ DQG &RUSRUDWH 3ROLF\ UG
(GLWLRQ$GGLVRQ:HVOH\3XEOLVKLQJSS
/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVSS
5HVHDUFK
7HFKQRORJ\0DQDJHPHQW-DQXDU\)HEUXDU\SS
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²*HQHUDO'LVFXVVLRQ
XQOLNHO\ ,Q RUGHU WR UHDOLVH WKH DGGLWLRQDO YDOXH SURYLGHG E\ WKH UHDO RSWLRQ WKHRU\
PDQDJHULDO LQFHQWLYHV KDYH WR EH EDODQFHG WR VXSSRUW WKH LPSOLFDWLRQV (VSHFLDOO\ WKH
YDOXH RI JURZWK RSWLRQV PD\ QRW EH DSSUHFLDWHG E\ RUJDQLVDWRULDO VWUXFWXUH RI RSWLRQ
KROGHU7KHIDLOXUHWRVHHWKHEHQHILWLQWKHHDUO\VWDJHSODWIRUPLQYHVWPHQWVFRXOGEHGXH
WRGHILFLHQFLHVLQWKHGHVLQJRILQIRUPDWLRQIORZV
3RVVLEOH$SSOLFDWLRQVLQWKH2UJDQLVDWLRQ
7KHNH\TXHVWLRQIRUWKHFDVHFRPSDQ\LVZKHWKHURUQRWWRLQFOXGHUHDORSWLRQDQDO\VLV
LQWKHWRROER[IRUSURMHFWHYDOXDWLRQ0RUHLPSRUWDQWO\LIWKHDSSURDFKLVVHOHFWHGLWKDV
WR EH LPSOHPHQWHG DFURVV WKH SURMHFW SRUWIROLR ,W LV FRPPRQ VHQVH WR UHDOLVH WKDW
VWDQGDUGPHWULFVVKRXOGEHXVHGZKHQFRPSDULQJWKHEHQHILWVIURPFRPSHWLQJSURMHFWV
$ IHZ VLPSOH JXLGHOLQHV DUH JLYHQ LQ WKH IROORZLQJ DV D VWDUWLQJ SRLQW IRU SRVVLEOH
LPSOHPHQWDWLRQ
4XDOLWDWLYHO\ WKH DSSOLFDWLRQ RI UHDO RSWLRQV PHWKRGRORJ\ LV FU\VWDOOL]HG LQ WKH VLPSOH
ELQDU\ FKRLFH ´$UH WKH RSWLRQV HPEHGGHG LQ WKLV LQYHVWPHQW RSSRUWXQLW\ ZRUWK PRUH
WKDQ WKH VKRUWIDOO LQ 139"µ )ROORZLQJ WKH URDGPDS EHORZ WKLV TXHVWLRQ FDQ EH
DQVZHUHG
• ,GHQWLI\UHOHYDQWUHDORSWLRQV
• $QDO\]HVWUXFWXUHRIWRWDOXQFHUWDLQW\
• 9DOXHWKHLGHQWLILHGRSWLRQVDQDO\WLFDOO\RUKHXULVWLFDOO\
,W VKRXOG EH VWUHVVHG WKDW VWURQJO\ DQDO\WLFDO YDOXDWLRQV VRPHWLPHV SURYLGH LPSURYHG
YDOXDWLRQV RQO\ DW WKH H[SHQVH RI WLPHFRQVXPLQJ PRGHOLQJ DQG QXPEHUFUXQFKLQJ DV
ZDV VKRZQ LQ WKH FDVH VWXG\ $ PRUH SUDFWLFDO YDOXDWLRQ LV UHDFKHG E\ VLPSO\ DVNLQJ
´+RZPXFKDUHZHZLOOLQJWRSD\QRZIRUWKLVIXWXUHIOH[LELOLW\RURSSRUWXQLW\"µ
$ WKHRUHWLFDOO\ VRXQG DQDO\VLV UHTXLUHV GHHSHU NQRZOHGJH RI RSWLRQ WKHRU\ DQG RI WKH
XQGHUO\LQJPDWKHPDWLFVLQLWEXWSURYLGHVDPRUHDFFXUDWHYDOXDWLRQ2QWKHRWKHUKDQG
TXLFN DQG HIIHFWLYH GHFLVLRQPDNLQJ ZDUUDQWV WKH XVH RI PRUH KHXULVWLF DQG LQDFFXUDWH
YDOXDWLRQ WRROV :KDW UHPDLQV LPSRUWDQW LV WKH LGHQWLILFDWLRQ DQG UHFRJQLWLRQ RI UHDO
RSWLRQVDQGWKHDVVHVVPHQWRIWKHLUYDOXHDVDSDUWRIWRWDOSURMHFWYDOXH,QWKLVUHVSHFW
WKHDXWKRUGRHVQRWEHOLHYHWKHUHLVDQ\RSWLRQ
5HTXLUHG5HVRXUFHV
2QH SHUVRQ LV SHUIHFWO\ FDSDEOH RI KDQGOLQJ WKH GDWD JDWKHULQJ IRU D VLQJOH SURMHFW
YDOXDWLRQ 2I FRXUVH ZKHQ PRUH SHUVRQV DUH DYDLODEOH WKH SURFHVV ZLOO DGYDQFH PRUH
UDSLGO\ DQG WKH EXUGHQ RI FRPPXQLFDWLQJ WKH UHVXOWV DQG LPSOLFDWLRQV ZLOO EH VPDOOHU
+RZHYHUDVWKHFDVHVWXG\RIWKLVWKHVLVVKRZVSRZHUIXOFRQFOXVLRQVFDQEHGUDZQHYHQ
IURPDUHODWLYHO\VPDOODPRXQWRIGDWD
7KHFDOFXODWLRQVWKHPVHOYHVDUHQRWWLPHFRQVXPLQJDVWKH\FDQEHSHUIRUPHGXVLQJD
VSUHDGVKHHW 7KH FROOHFWLRQ RI UHOHYDQW GDWD LV WKH PRVW WLPHFRQVXPLQJ SKDVH LQ WKH
HYDOXDWLRQSURFHVVEXWLWFDQEHVKRUWHQHGE\DGGLQJPRUHPDQSRZHULQWKHHYDOXDWLRQ
WHDP:KDWLVPRVWOLNHO\WRWDNHVRPHWLPHWKRXJKLVWKHHIIHFWLYHFRPPXQLFDWLRQRI
WKHUHVXOWVDQGLPSOLFDWLRQVRIWKHDQDO\VLV7KLVPD\EHRQHRIWKHNH\FRPSRQHQWVLQ
WKH VXFFHVVIXO LPSOHPHQWDWLRQ RI DQ\ YDOXDWLRQ PHWKRGRORJ\ FRPPXQLFDWH WKH UHVXOWV
HIIHFWLYHO\XQGHUVWDQGDEO\DQGTXLFNO\WRWKHGHFLVLRQPDNHUV
7RSLFVIRU)XUWKHU6WXG\
6RPH TXHVWLRQV UHPDLQ LQ WKH VHQVLWLYLW\ DQDO\VHV SHUIRUPHG ZKHQ H[DPLQJ WKH
VHQVLWLYLW\ RI WKH UHDO RSWLRQ YDOXDWLRQ ZLWK UHVSHFW WR FKDQJHV LQ WKH YRODWLOLW\ RI WKH
XQGHO\LQJ DVVHW 0RUH VSHFLILFDOO\ HUURU LV FUHDWHG ZKHQ FRPSDULQJ WKH FKDQJHV LQ WKH
UHDO RSWLRQ YDOXH ZLWK WKH VWDWLF 139 YDOXDWLRQ :KDW ZDV GRQH ZDV WR NHHS WKH
GLVFRXQW UDWH LQ WKH 139 YDOXDWLRQ FRQVWDQW VR WKDW WKH VWDWLF YDOXDWLRQ ZDV OHIW
XQDIIHFWHGDOWKRXJK WKH YDOXH IRU DVVHW YRODWLOLW\ ZDV DOORZHG WR FKDQJH ,Q WKLV ZD\ D
JUDSKZDVJHQHUDWHGZKHUHWKHUHDORSWLRQYDOXDWLRQH[FHHGHGWKH139YDOXDWLRQDERYH
DFHUWDLQ´WKUHVKROGµYRODWLOLW\+RZHYHULQUHDOLW\LQFUHDVHGYRODWLOLW\LQWKHXQGHUO\LQJ
DVVHW YDOXH VKRXOG LQFUHDVH WKH ULVNLQHVV RI WKH IXWXUH FDVKIORZV DOVR LQ WKH 139
FDOFXODWLRQVWKHUHE\DIIHFWLQJWKHRSSRUWXQLW\FRVWRIFDSLWDOXVHG ,Q VKRUW D KLJKHU
YDOXH IRU DVVHW YRODWLOLW\ VKRXOG LQWXLWLYHO\ LPSO\ D KLJKHU GLVFRXQW UDWH LQ WKH 139
YDOXDWLRQ WRR +RZHYHU QR PHQWLRQ RQ WKH H[LVWHQFH QRU RQ WKH IRUP RI WKLV
GHSHQGHQFHZDVIRXQGLQWKHDYDLODEOHUHIHUHQFHV
5HJDUGLQJWKHDVVXPSWLRQVPDGHLQWKLVWKHVLVUHMHFWLQJWKHDVVXPSWLRQRIULVNQHXWUDOLW\
RI GHFLVLRQPDNHUV ZRXOG GHSLFW WKH SURMHFW HYDOXDWLRQ SURFHVV PRUH UHDOLVWLFDOO\ 7KH
DQDO\VLV ZRXOG EHFRPH KHDYLHU VLQFH NH\ GHFLVLRQPDNHUV ZRXOG KDYH WR EH LGHQWLILHG
DQG WKHLU XWLOLW\IXQFWLRQV HVWLPDWHG EHIRUH VWDUWLQJ DFWXDO UHDO RSWLRQ DQDO\VLV ,Q DQ\
FDVH WKH UHVXOWV IURP WKLV SDWK RI UHVHDUFK ZRXOG EH PRUH DSSOLFDEOH IRU VPDOO
SKDUPDFHXWLFDOFRPSDQLHV²VXFKDVWKHFDVHFRPSDQ\²IRUZKLFKDUJXPHQWVIRUULVN
QHXWUDOLW\DUHPRUHGLIILFXOWWRFRPHE\
$GGLWLRQDOO\ PRGHOLQJ WKH 5 ' DFWLYLWLHV DV D VWRFKDVWLF MXPS SURFHVV ZRXOG SURYLGH
WKHRUHWLFDOO\PRUHFRUUHFWUHVXOWVIRUUHDORSWLRQDQDO\VLV7KLVDSSOLHVHVSHFLDOO\ZKHQWKH
SHULRGRIH[DPLQDWLRQLVVKRUWHUWKDQLQWKLVWKHVLV,QUHDOLW\WKHVWHSVRILQQRYDWLRQLQ
DQ\ 5 ' KDSSHQ GLVFUHWHO\ DW UDQGRP LQWHUYDOV )RU H[DPSOH VHQVLWLYLW\ DQDO\VLV IRU
UDQGRP ´OHDSV RI LQQRYDWLRQµ RI GLIIHUHQW VL]HV FRXOG SURYLGH XVHIXO LQVLJKW LQWR UHDO
RSWLRQDQDO\VLV
2QDPRUHJHQHUDOOHYHOVLPXOWDQHRXVYDOXDWLRQRIPXOWLSOHLQWHUDFWLQJUHDORSWLRQVLVD
FKDOOHQJLQJ GLUHFWLRQ IRU IXWXUH VWXG\ 7KLV W\SH RI VLWXDWLRQ FDQ HPHUJH IRU H[DPSOH
ZKHQ YDOXLQJ WKH SURGXFW SRUWIROLR RI D ELRWHFK FRPSDQ\ WKDW IRFXVHV RQ HDUO\VWDJH
SUHFOLQLFDO DQG FOLQLFDO GUXJ GHYHORSPHQW 7KHVH FRPSDQLHV W\SLFDOO\ KDYH VHYHUDO
FRPSRXQGVLQWKHLUSLSHOLQHDQGWKH\DOOSURYLGHDOWHUQDWLYHRSSRUWXQLWLHVIRUFRQWLQXHG
5 ' %\ XVLQJ WKH UHDO RSWLRQ PHWKRGRORJ\ WKH FRPSDQ\ FRXOG LGHQWLI\ WKH PRVW
YDOXDEOH JURZWK RSWLRQV DPRQJ WKH DOWHUQDWLYHV DQG H[WUDFW KLJKHVW YDOXH IURP WKH
SRUWIROLRRIPROHFXOHV6LPLODUYDOXDWLRQVVKRXOGEHSHUIRUPHGZKHQDVVHVVLQJWKHYDOXH
RIHQWLUHFRPSDQLHV7KHDFTXLVLWLRQSULFHRIDQ5 'RULHQWHGFRPSDQ\FDQEHPXFK
KLJKHU ZKHQ DFFRXQWLQJ IRU WKH YDOXH RI JURZWK RSWLRQV HPEHGGHG LQ WKH WDUJHW
FRPSDQ\
6HH)LJXUHLQSSDQG)LJXUHLQSS
6LQFHWKLVW\SHRIULVNLVIXOO\GLYHUVLILDEOHLWGRHVQRWDIIHFWWKHRSSRUWXQLW\FRVWRIFDSLWDO
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²*HQHUDO'LVFXVVLRQ
,QGXVWU\ZLVHUHDORSWLRQDSSURDFKWRYDOXDWLRQLVVXLWDEOHWRDQ\LQYHVWPHQWRSSRUWXQLW\
WKDW LV VWDJHG DQG VSDQV RYHU D SHULRG RI WLPH $ UHFHQW H[DPSOH LV WKH LQYHVWRU
HQWKXVLDVP RYHU QHZ WHFKQRORJ\EDVHG FRPSDQLHV IRU H[DPSOH IHZ DQDO\VWV VHH WUXH
FRQVXPHU YDOXH LQ :$3 ZLUHOHVV DSSOLFDWLRQ SURWRFRO HQDEOHG PRELOH SKRQHV <HW
FRPSDQLHVLQWKDWILHOGRIWHFKQRORJ\DUHKLJKO\DSSUHFLDWHGEHFDXVH:$3LVVHHQDVD
SODWIRUPWKDWSURYLGHVNQRZOHGJHRQIXWXUHVROXWLRQV,QVKRUWWKHXQNQRZQJURZWK
RSWLRQVHPEHGGHGLQ:$3WHFKQRORJ\DUHFRQVLGHUHGWRKDYHVXEVWDQWLDOYDOXH
$33(1',&(6
$33(1',;$
,QWKLVDSSHQGL[LWLVVKRZQKRZYDOXHVIRUWKHELQRPLDOODWWLFHPXOWLSOLHUVXDQGGDV
ZHOO DV IRU WKH ULVNQHXWUDO SUREDELOLW\ S DUH GHULYHG LQ D PDQQHU FRQVLVWHQW ZLWK
REVHUYDWLRQVRQUHDODVVHWYDOXHIOXFWXDWLRQV
6LQFH ERWK YDOXHV IRU X DQG G DUH DVVXPHG WR EH QRQQHJDWLYH DVVHW YDOXH FDQ QHYHU
EHFRPH QHJDWLYH 7KHUHIRUH ZH FDQ WDNH WKH ORJDULWKP RI YDOXH DV WKH IXQGDPHQWDO
YDULDEOHDQGGHILQH υ DVWKHH[SHFWHG\HDUO\JURZWKUDWHRIDVVHWYDOXH0RUHIRUPDOO\
V
υ = Ε ln T $
VO
ZKHUH VT LVWKHYDOXHDWWKHHQGRI\HDURQHDQG
VO LVWKHLQLWLDOYDOXHRIWKHDVVHW
/LNHZLVHZHGHILQH σ DVWKHDQQXDOVWDQGDUGGHYLDWLRQLQDVVHWYDOXH0RUHIRUPDOO\
V
σ = var ln T $
VO
Ε[ln V1 ] = p ln u + (1 − p) ln d $
[ ]
var(ln V1 ) = Ε (ln V1 ) − Ε[ln V1 ]
2 2
= p(ln u ) 2 + (1 − p )(ln d ) 2 − [ p ln u + (1 − p ) ln d ] $
2
= p(1 − p)(ln u − ln d ) . 2
7KXVWKHFRQGLWLRQVIRUDQH[DFWPDWFKEHWZHHQWKHWUXHDQGSDUDPHWHUYDOXHVDUH
pU + (1 − p ) D = υ∆t , $
p(1 − p)(U − D) 2 = σ 2 ∆t $
ZKHUH U = ln u D = ln d DQG ∆t LV WKH OHQJWK RI WKH IL[HG LQWHUYDO LQ WKH
$GDSWHGIURP/XHQEHUJHU'*,QYHVWPHQW6FLHQFH2[IRUG8QLYHUVLW\3UHVVFKDSWHU
ODWWLFH
(2 p − 1)U = υ∆t , $
4 p(1 − p)U = σ ∆t 2 2
$
U 2 = σ 2 ∆t + (υ∆t ) 2 . $
1
1 2
p= + $
2 σ2
1+ 2
υ ∆t ( )
ln u = σ 2 ∆t + (υ 2 ∆t ) $
ln d = − σ 2 ∆t + (υ 2 ∆t ) $
:KHQ WKH OHQJWK RI RQH VWHS LQ WKH ODWWLFH ∆t LV VPDOO FRPSDUHG WR WKH REVHUYDWLRQ
SHULRGVRI υ DQG σ D\HDUHTXDWLRQV$$FDQEHDSSUR[LPDWHGDVIROORZV
1 1 υ
p= + ( ) ∆t $
2 2 σ
u = eσ ∆t
$
d = e −σ ∆t
$
$33(1',;%
,QWUDQVIRUPDWLRQVRIGLIIHUHQWGLIIXVLRQSURFHVVHVWKHIROORZLQJOHPPDLVRIWHQXVHIXO
,WR·VOHPPD 6XSSRVHWKDWDUDQGRPSURFHVV[LVGHILQHGE\WKHLWRSURFHVV
ZKHUH ] LV D VWDQGDUG :LHQHU SURFHVV 6XSSRVH DOVR WKDW D SURFHVV y (t ) LV GHILQHG E\
y (t ) = F ( x, t ) 7KH y (t ) VDWLVILHVWKH,WRHTXDWLRQ
∂F ∂F 1 ∂ 2 F 2 ∂F
dy (t ) = ( a+ + b )dt + bdz %
∂x ∂t 2 ∂ x
2
∂x
ZKHUH]LVWKHVDPH:LHQHUSURFHVVDVLQHTXDWLRQ%7KHSURRILVRPLWWHGKHUHIRU
EUHYLW\
7KHSULQFLSOHRIRSWLRQYDOXDWLRQLQWKHFRQWLQXRXVFDVHLVVLPLODUWRWKHGLVFUHWHRQH
+RZHYHULQRXUHDUOLHUVLPSOHGHULYDWLRQRIWKHFDOORSWLRQYDOXHZHDVVXPHGWKDWWKH
XQGHUO\LQJDVVHWGLGQRWSURYLGHWKHKROGHUZLWKDQ\GLYLGHQGV7KHELQRPLDOPRGHOLV
HDVLO\ H[WHQGHGWRFRYHUVXFKDFDVHDQGZH ZLOO GR VR QRZ LQ WKH FRQWLQXRXV PRGHO
7KHUHIRUHOHW·VGHILQHWKHWRWDOH[SHFWHGUHWXUQIURPKROGLQJWKHXQGHUO\LQJDVVHWDV
µ =α + δ %
ZKHUH LV WKH H[SHFWHG SULFH DSSUHFLDWLRQ DQG LV D FRQVWDQW GLYLGHQG UDWH
/HW·VIXUWKHUDVVXPHWKDW[WKHYDOXHRIWKHXQGHUO\LQJDVVHWLVJRYHUQHGE\JHRPHWULF
%URZQLDQPRWLRQ
dx = αxdt + σxdz %
DQG WKDW F ( x, t ) GHQRWHV WKH YDOXH RI D DQ RSWLRQ WR WKH SURILW VWUHDP DFFUXLQJ IURP
KROGLQJWKHXQGHUO\LQJDVVHW/HW·VIRUPWKHUHSOLFDWLQJSRUWIROLRE\LQYHVWLQJRQH),0LQ
D ULVNOHVV DVVHW DQG EX\LQJ VRPH DPRXQW Q RI WKH XQGHUO\LQJ DVVHW 7KH FRVW RI
DFTXLULQJWKLVSRUWIROLRLVQ[),0,IZHKROGWKLVSRUWIROLRIRUDVKRUWWLPHLQWHUYDO
dt WKH ULVNOHVV DVVHW ZLOO \LHOG XV U dt IRU VXUH DQG WKH XQGHUO\LQJ DVVHW ZLOO \LHOG D
GLYLGHQG Q dt SOXV D VWRFKDVWLF FDSLWDO JDLQ RI Q dx nαxdt + nσxdz DFFRUGLQJ WR
HTXDWLRQ$
7KXVWKHFRPELQHGUHWXUQIURPWKHUHSOLFDWLQJSRUWIROLRSHUQ[),0LQYHVWHGLV
r + n(α + δ ) x δnx
dt + dz %
1 + nx 1 + nx
7KH IROORZLQJ GHULYDWLRQ LV DGDSWHG IURP 'L[LW $ . 3LQG\FN 5 6
,QYHVWPHQW8QFHU8QFHUWDLQW\3ULQFHWRQ8QLYHUVLW\3UHVVSS
1RZFRQVLGHUWKHYDOXHRIKROGLQJWKHRSWLRQWKDWFRVWV F ( x, t ) WREX\IRUWKHVDPHVKRUW
WLPH LQWHUYDO dt 7KH VWRFKDVWLF FDSLWDO JDLQ DFFUXLQJ WR WKH KROGHU FDQ EH GHQRWHG E\
dF ( x, t ) DQGXVLQJ,WR·VOHPPD%LWFDQH[SDQGHGDVIROORZV
1 2 2
Ft ( x, t ) + αxFx ( x, t ) + δ x Fxx ( x, t )
2 δxFx ( x, t )
dF ( x, t ) = dt + dz. %
F ( x, t ) F ( x, t )
1RZZHZDQWWKHVWRFKDVWLFPRYHPHQWVLQRXUUHSOLFDWLQJSRUWIROLRYDOXHEHH[DFWO\OLNH
WKHRQHVIURPKROGLQJWKHRSWLRQ7KXVZHUHTXLUHHVVHQWLDOO\WKDWWHUPVLQIURQWRI dz
LQHTXDWLRQV%DQG%HTXDO
δnx δxFx ( x, t )
= %
1 + nx F ( x, t )
1RWHWKDWWKHUDWHRIGLYLGHQGVFDQFHORXWIURPERWKVLGHVRIHTXDWLRQ%
1RZWKDWWKHUHWXUQVIURPKROGLQJERWKDVVHWVWKHUHSOLFDWLQJSRUWIROLRDQGWKHRSWLRQ
DUH LGHQWLFDOZHFDQXVHWKHQRDUELWUDJHSULQFLSOHDQG UHTXLUH WKH DVVHWV EH LGHQWLFDOO\
SULFHGHVVHQWLDOO\WKDWWHUPVLQIURQWRI dt LQHTXDWLRQV%DQG%HTXDO7KXVZH
FDQZULWH
1 2 2
Ft ( x, t ) + αxFx ( x, t ) + δ x Fxx ( x, t )
2 r + n(α + δ ) x
= . %
F ( x, t ) 1 + nx
nx
1RZZKHQZHVXEVWLWXWHWKHHTXLYDOHQWIRU IURPHTXDWLRQ%WKHULJKWKDQG
1 + nx
VLGHRIHTXDWLRQ%FDQEHZULWWHQDV
xF ( x, t ) xF ( x, t )
r 1 − x + (α + δ ) x %
F ( x, t ) F ( x, t )
:LWK D OLWWOH DOJHEUDLF PDQLSXODWLRQ RI HTXDWLRQ % ZH DUULYH DW D SDUWLDO GLIIHUHQWLDO
HTXDWLRQJRYHUQLQJWKHYDOXH F ( x, t ) RIWKHRSWLRQ
1 2 2
δ x Fxx ( x, t ) + (r − δ ) xFx ( x, t ) + Ft ( x, t ) − rF ( x, t ) = 0 %
2
1RWH WKDWQRH[RJHQRXVO\GHILQHGULVN SUHPLXP LV QHHGHG LQ WKH IRUPXOD ,QVWHDG WKH
WLPHYDOXHRIWKHRSWLRQLVGHULYHGXVLQJWKHULVNIUHHLQWHUHVWUDWH r ,WVKRXOGEHIXUWKHU
QRWHGWKDWE\RPLWWLQJWKHGLYLGHQGWHUP δ HTXDWLRQ%EHFRPHVWKHIDPRXV%ODFN
6FKROHVHTXDWLRQIRUWKHYDOXHRIDQRSWLRQRQDSLHFHRIVWRFN,QJHQHUDOPRUHH[DFW
FKDUDFWHULVWLFVRIWKHRSWLRQFDOORUSXWDUH GHWHUPLQHG E\ IL[LQJ WKH ERXQGDU\ YDOXHV
IRUWKHVROXWLRQRIWKHHTXDWLRQ%
)RU D FRPSDULVRQ VHH IRU H[DPSOH /XHQEHUJHU ' * ,QYHVWPHQW 6FLHQFH 2[IRUG 8QLYHUVLW\
3UHVVSSHTXDWLRQ
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²$SSHQGLFHV
$33(1',;&
7KH PHWKRG RI VWRFKDVWLF G\QDPLF SURJUDPPLQJ LV DQ HOHJDQW DSSOLFDWLRQ RI WKH
%HOOPDQ·V3ULQFLSOHRI2SWLPDOLW\ $Q RSWLPDO SROLF\ KDV WKH SURSHUW\ WKDW ZKDWHYHU WKH LQLWLDO
DFWLRQWKHUHPDLQLQJFKRLFHVFRQVWLWXWHDQRSWLPDOSROLF\ZLWKUHVSHFWWRWKHVXESUREOHPVWDUWLQJDWWKH
VWDWHWKDWUHVXOWVIURPWKHLQLWLDODFWLRQV,IZHGHQRWHWKHYDOXHRIWKHXQGHUO\LQJDVVHWZLWK
xt DWWLPH t WKH%HOOPDQHTXDWLRQLQGLVFUHWHWLPHFDQEHZULWWHQDVIROORZV
Ε t [Ft +1 ( xt +1 )],
1
Ft ( x t ) = max π t ( x t , u t ) + &
ut 1+ ρ
0RUH VSHFLILFDOO\ FRQVLGHU DQ XQGHUO\LQJ DVVHW ZKRVH YDOXH LV JRYHUQHG E\ JHRPHWULF
%URZQLDQPRWLRQZLWKFKDUDFWHULVWLFVVLPLODUWRWKRVHLQHTXDWLRQ%
,QWKLVH[DPSOHDVVHWRZQHUVKLSLVDOUHDG\ZLWKWKHRSWLRQKROGHUDQGWKHYDOXHRIWKH
RSWLRQFRQVLVWVRIULJKWVWRDEDQGRQWKHSURMHFWIRUWHUPLQDOYDOXHGHQRWHGE\ Ω( x, t )
'L[LW$.3LQG\FN56,QYHVWPHQW8QFHU8QFHUWDLQW\3ULQFHWRQ8QLYHUVLW\3UHVVSS
7KH IROORZLQJ H[SRVLWLRQ LV DGDSWHG IURP 'L[LW $ . 3LQG\FN 5 6 ,QYHVWPHQW 8QFHU
8QFHUWDLQW\3ULQFHWRQ8QLYHUVLW\3UHVVSS
7KHSURRIRIFRQYHUJHQFHLVRPLWWHGIRUEUHYLW\
,QWKLVFDVHWKH%HOOPDQHTXDWLRQIRUWKHRSWLPDOVWRSSLQJSUREOHPWDNHVWKHIRUP
{
F ( x, t ) = max Ω( x, t ), π ( x, t )dt + (1 + ρdt ) −1 Ε[F ( x + dx, t + dt ) x ] & }
ZULWWHQLQWKHFRQWLQXRXVFDVHZKHUH
π ( x, u ) QRZUHSUHVHQWVWKHUDWHRISURILWIORZSHURQHWLPHXQLWDQG
ρ LVWKHGLVFRXQWUDWHSHUXQLWWLPH
7KHFKRLFHLQHYHU\SHULRGLVWKHQEHWZHHQWKHWHUPLQDWLRQYDOXHDQGFRQWLQXDWLRQRI
RSHUDWLRQVZKLFKFRPSULVHVWKHVXPRIFXUUHQWSURILWIORZDQGGLVFRXQWHGYDOXHVRIDOO
IXWXUHSURILWV
,Q WKH FRQWLQXDWLRQ UHJLRQ ZKLFK LV GHULYHG DV RQH SDUW RI WKH ILQDO VROXWLRQ WKH
FRQWLQXDWLRQ YDOXH LV SLFNHG VLQFH LW LV ODUJHU RI WKH WZR SRVVLEOH FKRLFHV LQ WKH ULJKW
KDQGVLGHRIHTXDWLRQ&,IZHPXOWLSO\WKHZKROHHTXDWLRQ&ZLWK (1 + ρdt ) DQG
UHDUUDQJHZHFDQZULWH
1RZQRWHWKDWE\XVLQJ,WR·VOHPPD%
Ε[F ( x + dx, t + dt )] = F ( x, t ) + Ft ( x, t ) + αxFx ( x, t ) + δ 2 x 2 Fxx ( x, t ) dt + o(dt ) &
1
2
1 2 2
δ x Fxx ( x, t ) + αxFx ( x, t ) + Ft ( x, t ) − ρF ( x, t ) + π ( x, t ) = 0 &
2
7KHFXUYHGHILQLQJWKHFRQWLQXDWLRQUHJLRQ x = x * (t ) FDQEHVROYHGIURPWKHERXQGDU\
FRQGLWLRQVVSHFLILFWRWKHRSWLRQXQGHUFRQVLGHUDWLRQ
5()(5(1&(6
/,7(5$785(
%DU,ODQ $ 6WUDQJH : & $ 0RGHO RI 6HTXHQWLDO ,QYHVWPHQW -RXUQDO RI
(FRQRPLF'\QDPLFVDQG&RQWURO9ROSS
%HUJHU 3 * 2IHN ( 6ZDU\ , ,QYHVWRU 9DOXDWLRQ RI WKH $EDQGRQPHQW
2SWLRQ-RXUQDORI)LQDQFLDO(FRQRPLFV9ROSS
%RHU ) 3 7KH 9DOXDWLRQ RI 7HFKQRORJ\ ² %XVLQHVV DQG )LQDQFLDO ,VVXHV LQ
5 '-RKQ:LOH\ 6RQV,QF
%RZPDQ ( + +XUU\ ' 6WUDWHJ\ 7KURXJK WKH 2SWLRQ /HQV $Q ,QWHJUDWHG
9LHZ RI 5HVRXUFH ,QYHVWPHQWV DQG WKH ,QFUHPHQWDO&KRLFH 3URFHVV $FDGHP\ RI
0DQDJHPHQW5HYLHZ9RO1RSS
%UHDOH\ 5 $ 0\HUV 6 & 3ULQFLSOHV RI &RUSRUDWH )LQDQFH (GLWLRQ
WK
0F*UDZ+LOO
%XQFK 35 6FKDFKW $ $JJUHJDWH 5HVRXUFH 0RGHOV IRU WKH 3KDUPDFHXWLFDO
5HVHDUFKDQG'HYHORSPHQW3URFHVV5HVHDUFK3DSHU(OL/LOO\DQG&RPSDQ\
5HDO2SWLRQV&RQIHUHQFH-XQH7KH1HWKHUODQGV
&RRSHU 5 * 6WDJH*DWH 6\VWHPV $ 1HZ 7RRO IRU 0DQDJLQJ 1HZ 3URGXFWV
%XVLQHVV+RUL]RQV0D\-XQHSS
RI&RPSDQLHV-RKQ:LOH\ 6RQV1HZ<RUN
&RSHODQG 7 $ .HHQDQ 3 7 0DNLQJ 5HDO 2SWLRQV 5HDO 7KH 0F.LQVH\
4XDUWHUO\1XPEHUSS
&RSHODQG 7 $ :HVWRQ - ) )LQDQFLDO 7KHRU\ DQG &RUSRUDWH 3ROLF\ UG
(GLWLRQ$GGLVRQ:HVOH\3XEOLVKLQJ
&R[ -& ,QJHUVROO -( 5XELQVWHLQ 0 2SWLRQ 3ULFLQJ $ 6LPSOLILHG
$SSURDFK-RXUQDORI)LQDQFLDO(FRQRPLFV9ROSS
&R\QH . 3 6XEUDPDQLDP 6 %ULQJLQJ 'LVFLSOLQH WR 6WUDWHJ\ 7KH 0F.LQVH\
4XDUWHUO\1XPEHUSS
&RXUWQH\ + .LUNODQG - 9LJXHULH 3 6WUDWHJ\ 8QGHU 8QFHUWDLQW\ +DUYDUG
%XVLQHVV5HYLHZ1RYHPEHU'HFHPEHUSS
'DYLV * $ (VWLPDWLQJ 9RODWLOLW\ DQG 'LYLGHQG <LHOG :KHQ 9DOXLQJ 5HDO
2SWLRQVWR,QYHVWRU$EDQGRQ7KH4XDUWHUO\ 5HYLHZ RI (FRQRPLFV DQG )LQDQFH9RO
6SHFLDO,VVXH2Q5HDO2SWLRQVSS
'HQWVNHYLFK 3 6DONLQ * 9DOXDWLRQ RI 5HDO 3URMHFWV 8VLQJ 2SWLRQ 3ULFLQJ
7HFKQLTXHV,QWHUQDWLRQDO-RXUQDORI0DQDJHPHQW6FLHQFH9RO1RSS
'L[LW $ . 3LQG\FN 5 6 7KH 2SWLRQV $SSURDFK WR &DSLWDO ,QYHVWPHQW
+DUYDUG%XVLQHVV5HYLHZ0D\-XQHSS
7KH (FRQRPLVW $ 6XUYH\ RI WKH 3KDUPDFHXWLFDO ,QGXVWU\ 6SHFLDO (GLWLRQ
)HEUXDU\ VW
)DXONQHU 7 : $SSO\LQJ ¶2SWLRQV 7KLQNLQJ· WR 5 ' 9DOXDWLRQ 5HVHDUFK
7HFKQRORJ\0DQDJHPHQW0D\-XQHSS
SS
*UDERZVNL + * 9HUQRQ - 0 $ 1HZ /RRN DW WKH 5HWXUQV DQG 5LVNV WR
3KDUPDFHXWLFDO5 '0DQDJHPHQW6FLHQFH9ROSS
+RZHOO 6 ' -lJOH $ - /DERUDWRU\ (YLGHQFH RQ +RZ 0DQDJHUV ,QWXLWLYHO\
9DOXH 5HDO*URZWK2SWLRQV-RXUQDORI%XVLQHVV $FFRXQWLQJ 6HSWHPEHU 9RO
SS
,QJHUVROO -( -U 5RVV 6$ :DLWLQJ WR ,QYHVW ,QYHVWPHQW DQG 8QFHUWDLQW\
-RXUQDORI%XVLQHVVSS
-RKQVRQ %ODNH 7HDFKQLQJ 1RWH 3URMHFW 0DQDJHPHQW 2SWLRQV 6WDQIRUG
8QLYHUVLW\SS
-lUYHQSll ( .RVRQHQ . ,QWURGXFWLRQ WR 6FLHQWLILF 0HWKRGV DQG 6FLHQWLILF
5HVHDUFK+HOVLQNLQ8QLYHUVLW\RI7HFKQRORJ\(VSRR
.HPQD $ * = &DVH 6WXGLHV RQ 5HDO 2SWLRQV )LQDQFLDO 0DQDJHPHQW
SS
.LYLVDDUL 7 $QDO\VLV RI 5HDO 2SWLRQ 0RGHOV LQ WKH 9DOXDWLRQ RI 6WUDWHJLF
,QYHVWPHQWV0DVWHU
V7KHVLV+87
.XODWLODND 1 0DUFXV $- 3URMHFW 9DOXDWLRQ 8QGHU 8QFHUWDLQW\ :KHQ 'RHV
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²5HIHUHQFHV
'&))DLO"-RXUQDORI$SSOLHG&RUSRUDWH)LQDQFH:LQWHUSS
/RFNHWW * $OLL 0RGHOLQJ 6WUDWHJLF 'HFLVLRQ 0DNLQJ DQG 3HUIRUPDQFH
0HDVXUHPHQWVDW,&,3KDUPDFHXWLFDOV,QWHUIDFHV1RYHPEHU'HFHPEHUSS
/XHKUPDQ 7 $ :KDW·V ,W :RUWK" $ *HQHUDO 0DQDJHU·V *XLGH WR 9DOXDWLRQ
+DUYDUG%XVLQHVV5HYLHZ0D\-XQHSS
/XHKUPDQ 7 $ 6WUDWHJ\ DV D 3RUWIROLR RI 5HDO 2SWLRQV +DUYDUG %XVLQHVV
5HYLHZ6HSWHPEHU2FWREHUSS
0DQVILHOG ( &RPSRVLWLRQ RI 5 ' ([SHQGLWXUHV 5HODWLRQVKLS WR WKH 6L]H RI
)LUP&RQFHQWUDWLRQDQG,QQRYDWLYH2XWSXW5HYLHZRI(FRQRPLF6WDWLVWLFV9ROD
SS
0DVRQ 6 3 7ULJHRUJLV / 9DOXLQJ 0DQDJHULDO )OH[LELOLW\ 0LGODQG &RUSRUDWH
)LQDQFH-RXUQDO6SULQJSS
0LFDOL]]L $ 7LPLQJ WR ,QYHVW DQG 9DOXH RI 0DQDJHULDO )OH[LELOLW\ 6FKHULQJ
3ORXJK&DVH6WXG\5HVHDUFK3DSHUSUHVHQWHGWKHUG$QQXDO5HDO2SWLRQV&RQIHUHQFH
-XQH7KH1HWKHUODQGV
0LOJURP 3 5REHUWV - (FRQRPLFV 2UJDQLVDWLRQ DQG 0DQDJHPHQW 3UHQWLFH
+DOO1-
0\HUV 6 & 'HWHUPLQDQWV RI &RUSRUDWH %RUURZLQJ -RXUQDO RI )LQDQFLDO
(FRQRPLFV9ROSS
5HVHDUFK3DSHU6ORDQ6FKRRORI0DQDJHPHQW0,7
1LFKROV 1 $ 6FLHQWLILF 0DQDJHPHQW DW 0HUFN $Q ,QWHUYLHZ ZLWK &)2 -XG\
/HZHQW+DUYDUG%XVLQHVV5HYLHZ-DQXDU\)HEUXDU\SS
2WW 6 + 7KRPSVRQ + ( 8QFHUWDLQ 2XWOD\V LQ 7LPHWREXLOG 3UREOHPV
0DQDJHULDODQG'HFLVLRQ(FRQRPLFV9ROSS
3LQG\FN 56 5XELQIHOG '/ (FRQRPHWULF 0RGHOV DQG (FRQRPLF )RUHFDVWV
0F*UDZ+LOO (GLWLRQ
WK
3LQFKHV * ( 5HDO 2SWLRQV 'HYHORSPHQWV DQG $SSOLFDWLRQV 7KH 4XDUWHUO\
5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
3LQFKHV * ( /DQGHU ' 0 &KDOOHQJHV WR WKH 3UDFWLFDO ,PSOHPHQWDWLRQ RI
0RGHOLQJ DQG 9DOXLQJ 5HDO 2SWLRQV 7KH 4XDUWHUO\ 5HYLHZ RI (FRQRPLFV DQG
)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
6KDUS ' - 8QFRYHULQJ WKH +LGGHQ 9DOXH LQ +LJK5LVN ,QYHVWPHQWV 6ORDQ
0DQDJHPHQW5HYLHZ6XPPHUSS
6KDUS 3 .HHOLQ 7 +RZ 6PLWK.OLQH %HHFKDP 0DNHV %HWWHU 5HVRXUFH
2OOLOD-0DVWHU·V7KHVLV+HOVLQNL8QLYHUVLW\RI7HFKQRORJ\
'HSDUWPHQWRI,QGXVWULDO(QJLQHHULQJDQG0DQDJHPHQW
5HDO2SWLRQVLQ3KDUPDFHXWLFDO5 '²5HIHUHQFHV
$OORFDWLRQ'HFLVLRQV+DUYDUG%XVLQHVV5HYLHZ0DUFK$SULOSS
6PLWK - ( 1DX 5 ) 9DOXLQJ 5LVN\ 3URMHFWV 2SWLRQ 3ULFLQJ 7KHRU\ DQG
'HFLVLRQ$QDO\VLV0DQDJHPHQW6FLHQFH9RO1R0D\SS
6SDKU 5 : 6FKZHEDFK 5 * &RPSDULQJ 0HDQ 5HYHUWLQJ 9HUVXV 3XUH
'LIIXVLRQ ,QWHUHVW 5DWH 3URFHVVHV LQ 9DOXLQJ 3RVWSRQHPHQW 2SWLRQV 7KH 4XDUWHUO\
5HYLHZRI(FRQRPLFVDQG)LQDQFH9RO6SHFLDO,VVXH2Q5HDO2SWLRQVSS
7ULJHRUJLV / 5HDO 2SWLRQV 0DQDJHULDO )OH[LELOLW\ DQG 6WUDWHJ\ LQ 5HVRXUFH
$OORFDWLRQ0,73UHVV
,17(59,(:6
3lLYL$KR3URMHFW&KDPSLRQ2ULRQ3KDUPD
6RQMD%M|UNOXQG$QDO\VW0RUJDQ6WDQOH\'HDQ:LWWHU
5LNX/DSSL0DUNHW$QDO\VW2ULRQ3KDUPD
&ODXGH/XELFNL9LFH3UHVLGHQW2ULRQ3KDUPD
6DLOD0LHWWLQHQ/lKGH%XVLQHVV'HYHORSPHQW2ULRQ3KDUPD
.DUL3HNND0lNHOl%XVLQHVV'HYHORSPHQW0DQDJHU2ULRQ3KDUPD
,OSR3XKDNDLQHQ&OLQLFDO'HYHORSPHQW/HDGHU2ULRQ3KDUPD
.LULDNRV9ODKRV$VVRFLDWH3URIHVVRU/RQGRQ%XVLQHVV6FKRRO
,17(51(75(6285&(6
KWWSZZZUHDORSWLRQVFRP
KWWSZZZIWFRP