The Research on SME's Equity Value with Stochastic Pricing Method

摘要

In order to value the equity of SME effectively, we modify the traditional DCF model, namely, we use stochastic variable to describe the factors which have direct impact on cash-in and cash-out; then we use stochastic equation to portray the change of equity valuation; finally, we will simulate the change of equity valuation within some periods by Monte Carlo simulation. In accordance with the result coming from the simulation, we find that there exists a big probability that the company will bankrupt, however, their growth speed is extremely high and potential value is decent, which rightly fit the realistic situation. therefore, this modified method has, to some extent, reference value in valuing the equity of SME.