Specific Company Risk Premium
Also written SCRP · Specific Company Risk Premium (SCRP)
An additional premium analysts add to the discount rate for start-ups, reflecting unsystematic risks such as absence of track record, losses, private funding, high mortality and illiquidity, over and above the…
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Bottom-up approachSizing a market by taking the revenue of individual companies and aggregating it upward — accurate where companies disclose, blind where they do not.
- Discounted Cash FlowA valuation method that estimates the cash a business will generate in future years and converts each year back to what it is worth today.
- Enterprise ValueWhat it would cost to buy the whole business — market capitalisation plus debt, less cash — as opposed to market capitalisation, which buys only the equity.
- Fair valueThe theoretical futures price — spot plus the cost of carrying the commodity to expiry — at which a buyer is indifferent between buying today and buying forward.
- Relative valuationValuing an asset from the prices of comparable assets rather than from its own cash flows — quick, intuitive, and dependent on whoever set those comparable prices being right.
- Terminal valueThe value of everything a business earns after the end of the explicit forecast period, capitalised as a perpetuity or an exit multiple and then discounted back — usually most of a DCF answer.
Where this is taught
Free preparation for NISM Series XIX-A← All terms