In response to user comments about limitations of his average-strike put option DLOM model, John Finnerty (Alix Partners) has developed a new version that can be generalized to accommodate a restriction period of any particular fixed length. He recommends that his old model be used for restriction periods of up to one year, but his new version should be used for restriction periods of more than two years (either model can be used for periods of one to two years). Finnerty also developed an extension of the new model that will accommodate situations where the length of the restriction period is uncertain, as, for example, when it is unclear when a private company might achieve a liquidity event.
Data needed: Finnerty presented the new model during a BVR webinar and asked the audience for comments and suggestions. He would also like some real data for testing purposes. “If anybody has a sample of private company data, I would love to test this model,” he says. Anyone who provides the data will be listed as a co-author of the paper Finnerty writes on the new model, but, he says, “I’ll do all the work.”
You can contact Finnerty at email@example.com. His webinar, Discount for Lack of Marketability for Any Restriction Period—Mastering the Average-Strike Put Option DLOM Model, can be acquired if you click here.