Explain merits and demerits of standard market practice
Explain merits and demerits of standard market practice to find the volatility as a function of underlying.
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On the plus side, it is not too difficult to do in theory. But on the minus side, the practice is much harder, the sought volatility function depending extremely sensitively upon the initial data. From a scientific view point there is much to be said against the methodology.
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You work in Walt Disney Company’s corporate finance and treasury department and have just been assigned to the team estimating Disney’s WACC. You must estimate this WACC in preparation for a team meeting later today....?
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