And it’s not just NAMA. From Boston to Berlin, valuation of distressed assets is a hot topic these days. Jacco Thijssen‘s new Irish Economy Note “Valuing Distressed Assets Using Optimal Stopping Theory” looks at some of the underlying maths that could be used.
3 replies on “The maths of NAMA-type valuations”
Here’s a little rant along the same lines, for the static case. There’s clearly a dimensionality problem, and it’s a toy case, but it made thinking about the problem more fun. http://stephenkinsella.net/banksmax.pdf.
No wonder it is all taking so long!
Jacco Thijssen uses geometric Brownian motion for convenience and this assumes that the growth rate for the profitability of the distressed asset is constant. This is like coming up with the perfect theory on distressed asset valuations and then saying, by the way, all my calculations are based on assumptions which simply do not exist in the REAL WORLD!
Fascinating stuff, no doubt, for mathematical nerds but not really of any interest to a tax payer who wants to know how big the Lenihan NAMA bill is going to be for his grandchildren and great grandchildren.
Somewhere between the legal problems and the mathematical quantum physics models of asset valuations, lies the obvious fact, that NAMA will not work. The only hope is that in the white heat of NAMA failure Irish society will be forced to implement our constitution which currently lies in tatters.