One of the most complex areas of financial risk management is pricing and valuing alternative investments. It’s also one of the most important areas for businesses to execute well. In this white paper, IBM discusses the integrated risk management and modeling frameworks available to help your organization’s risk management team better manage the value of a single security or portfolio in the future, as well as to identify the valuation factors of the portfolio or security. Modeling and analysis can provide information on the risk relationship to public investments as well as give information on the volatility of private securities. But the model selected must relate to the potential investment, be it real estate or infrastructure; one model does not function for all public and private investments.
Choosing the proper model to use for private market securities depends on the information and features of the private security itself. Learn how users can input specific parameters and modify factors to analyse a variety of potential scenarios, and be confident that the model will yield accurate results regarding information on volatility. Users can also map the risk relationship to public investments. Details on five modeling methods are addressed in depth in order to help you select the best model for the potential investment: factor models, sensitivity instruments, distribution uploads curve/formula fitting, cash flow replication, and custom equations, allowing your organization to assess risk over a wide variety of criteria and make investment choices with confidence.
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