European Business Schools Librarian's Group
IESE Research Papers,
IESE Business School
No D/682: Measuring idiosyncratic risks in leveraged buyout transactions
Alexander P. Groh (), Rainer Baule and Oliver Gottschalg
Additional contact information
Alexander P. Groh: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Rainer Baule: University of Goettingen
Oliver Gottschalg: HEC School of Management
Abstract: We use a CCA model to calculate implied idiosyncratic risks of LBO transactions. A decisive model feature is the consideration of amortization. From the model, the asset value volatility and the equity value volatility can be derived via a numerical procedure. For a sample of 40 LBO transactions we determine the necessary model parameters and calculate the transactions' implied idiosyncratic risks. We discuss the expected model sensitivities and verify them by variation of the input parameters. With the knowledge of the returns to the equity investors of the LBOs we are able to calculate Sharpe Ratios on individual transaction levels for the first time, thereby fully incorporating the superimposed leverage risks.
Keywords: Idiosyncratic Risk; Private Equity; Benchmarking
19 pages, March 15, 2007
Full text files
DI-0682-E.pdf
Questions (including download problems) about the papers in this series should be directed to Noelia Romero ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:ebg:iesewp:d-0682This page generated on 2024-09-13 22:20:02.