Modeling financial variables and share pricing in a manufacturing company

In this article, some continuous – time processes have been used to describe revenues, costs and depreciation structure of a manufacturing company. We also consider random variables for collection and payment period of Accounts Receivable and Accounts Payable. We approximated a discrete– time stochastic model from the base model and we tested the second model on accounting data of a company. After running simulation, we calculated expected value and standard deviation of the share value and probability of bankruptcy. Finally sensitivity analysis showed the key parameter affecting that company is long term – coefficient of variable costs.

Keywords:

Finance , Stochastic processes , Risk – Neutral valuation , Monte Carlo Simulation , Bankruptcy