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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Reginald Middleton who wrote (28754)	2/24/1998 3:21:00 PM
From: AK2004	Read Replies (1) \| Respond to of 1573092

Regy if you seriously want to learn finance I think we should start with basics like a definition of PV sum(cf(t)p(t)D(t)) something to keep in mind is D(t) is interest rate scenario dependant that why it is important to run interest rate simulations at the same time. (I would recommend using at least 2-factor HJM for that). I would recommend using the stochastic process for cf(t)as well but that would be in the next lesson. (I am going to charge you for the next one :-)) ) p(t) is a probability and a product of combines processes. Now lets ignore residual spreads due to misc issues and concentrate on default risk. PV of default would be equal to PV of the spread unless defaults are modeled explicitly. No matter how defaults are modeled it is absolutely wrong to add the existing assets to the value of the company simply because those assets would probably contribute to your future cash flows one way or another and hence you are going to doublecount. And hence if both companies have the same cash flow patterns and the same probability of default than they are equal in value. Now if you want me to help you with anything else I would be more than happy to set-up some hours for you and to charge my old consulting rate. :-))