Risk analysis and asset valution: A Monte Carlo Simulation using stochastic rents

Introduction of the Present Value Distribution Model (PVD) offers an alternative method for the valuation of projects yielding intertemporal stochastic rents. A combination of concepts from many areas of the literature yields the given model. The base procedure relies on Monte Carlo Simulation with the application of recently established theories on stochastic rents, path dependent cash flow trajectories, and period dependent discount rates.Among the benefits of the (PVD) are exogenous risk discounting and consistent distribution determination. Risk discounting is applied to the resultant of the distribution model rather than within the model. Furthermore, the present value distributions are independent of analyst's perceptions yielding an objective single period gamble.