Valuing private equity analytically
A framework that includes liquidity and market completeness for PE valuation is introduced
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Alexander Lipton and Marcos López de Prado develop analytical methods for valuing private equity investments under exponential utility. They derive closed-form solutions to nonlinear Hamilton-Jacobi-Bellman equations for certainty-equivalent prices, incorporating illiquidity and market incompleteness, and compute optimal allocations between liquid and illiquid assets
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