Discussion of arbitrage-free valuation of exhaustible resource firms

Shackleton, Mark B. (1998) Discussion of arbitrage-free valuation of exhaustible resource firms. Journal of Business Finance and Accounting, 25 (9-10). pp. 1391-1395. ISSN 0306-686X

Abstract

In summary, if equity markets value firms using some latent pricing model, many aspects of which can be captured by multifactor models, we should be able to recover model parameters from observed equity values and futures prices.Thus theHotelling Valuation Principle can be extended to incorporate risk pricing and multiple uncertainties in which setting futures play a special role as certainty equivalents. The paper by Lehocky and Paxson marks one such examination of a firm's value and will no doubt stimulate more.