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Equity valuation under stock dilution and buy-back

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  • Employing and generalizing the (continuous time, incomplete market) equity valuation (and hedging) theory introduced recently by one of the authors, the effect of stock dilution and buy-back on the equity value is quantified. Both, neutral and indifference pricing methodologies are considered, and results of different levels of complexity are provided. Hedging results are provided as well. Both pricing and hedging results are obtained as special cases of the general methodology of pricing and hedging in incomplete markets recently developed by one of the authors.
    Mathematics Subject Classification: Primary: 91G20, 91G80; Secondary: 35K55.


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