Discount for lack of marketability/liquidity
Hello
I am only a few months away from finishing my MFin and I'm now writing my master thesis. In my thesis I am trying to build a model for estimating illiquidity discounts (liquidity premiums), which I am going to compare to other methods used to quantify this discount. What I am trying to do right now is to get a picture of which methods are most popular among professionals. I have been in contact with some people working in IB and TAS and gotten some opinions from them, but I would like to get some more. Which method do you guys prefer?
The methods I am going to compare are:
- Put option models (Lookback options and average-strike puts)
- Factor models (APT and liquidity adjusted CAPM)
- Empirical models (Restricted stock studies, IPO studies and comparable transactions)
- Synthetic bid-ask spreads
- QMDM
Thank you!
On another note - Wasn't sure which forum to put this in so I went with what seemed like the most popular one.
The preferred method I've seen being used are variants of the put-option models.
I've seen mostly empirical models (PIPE's, etc)
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