Anatomy of a model: Valuation of physical assets

Quant ideas paper dissects layers of valuation models for physical assets

Anatomy of a model - Valuation of physical assets
This paper assesses which models are applicable to what assets

When assessing the valuation of physical assets, the word ‘model' means many things to many people. To a quant it tends to be the problem of stochastic optimisation under complex constraints. To another quant – or the same one in a different context – it may be the use of stochastic processes to map the behaviour of commodity prices to a mathematical abstraction. The quant developer is concerned primarily with software implementations, their system representation and the requisite concerns about