Home  Journals  Financial Analytics: Science and Experience  11(197) - 2014 March

Value of Russian banks before the 2008 crisis: bubble or real option?

Available online: 15 March 2014

Subject Heading: PAGES OF HISTORY

JEL Classification: 

Pages: 48-58

Multipliers of the capital of the Russian banks at the turn of 2007-2008 were extremely high, suggesting that this is the exchange bubble. The paper reconstructs the possible rational reason of high cost connected with existence of a real option. The author uses two approaches: analysis of trees of decisions and binomial model. The analysis shows that from this option only some investors could receive benefit. Therefore, the hypothesis of a local bubble of bank actions remains.

Keywords: real option, analysis, decision tree, flexibility valuation, DCF, bank, bubble, rationality

References:

1. Timofeev D.V. Stoimost' bankov Rossii pered krizisom 2008 g.: byl li puzyr'? [Value of the Russian banks before the 2008 crisis: was it a bubble?]. Upravlenie korporativnymi finansami – Corporate Finance Management, 2013, no. 04 (58).
2. Bokov V., Vernikov A. Quality of Governance and Bank Valuation in Russia: An Empirical Study. Moscow, Corporate Finance, 2008, no. 3 (7).
3. Copeland T., Antikarov E. Real Options: A Practitioner’s Guide. New York, Texere, 2001.
4. Damodaran A. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. New York: Wiley, 2002.
5. Kindleberger C., Aliber R. Manias, Panics, and Crashes: A History of Financial Crises. Hoboken, NJ: Wiley, 2005.
6. McKinsey and Company, Koller T., Goedhart M., Wessels D. Valuation: Measuring and Managing the Value of Companies. Hoboken, N.J.: John Wiley & Sons, 2010.
7. Shiller R. Irrational Exuberance. Princeton, N.J.: Princeton University Press, 2005.

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ISSN 2311-8768 (Online)
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