{"id":55062,"date":"2025-06-19T17:55:00","date_gmt":"2025-06-19T16:55:00","guid":{"rendered":"https:\/\/valuesque.com\/en\/?page_id=55062"},"modified":"2025-06-26T17:55:26","modified_gmt":"2025-06-26T16:55:26","slug":"complex-structures-and-financial-instruments","status":"publish","type":"page","link":"https:\/\/valuesque.com\/en\/cases-stories\/complex-structures-and-financial-instruments\/","title":{"rendered":"Cases & Stories_Complex structures and financial instruments"},"content":{"rendered":"

[vc_row row_height_percent=”80″ override_padding=”yes” h_padding=”2″ top_padding=”4″ bottom_padding=”4″ back_image=”54077″ back_repeat=”no-repeat” back_attachment=”scroll” back_position=”center top” parallax=”yes” overlay_color=”color-190198″ overlay_alpha=”75″ equal_height=”yes” gutter_size=”3″ column_width_percent=”100″ shift_y=”0″ z_index=”0″][vc_column column_width_percent=”100″ position_vertical=”bottom” gutter_size=”3″ overlay_alpha=”50″ shift_x=”0″ shift_y=”0″ shift_y_down=”0″ z_index=”0″ medium_width=”0″ mobile_width=”0″ width=”1\/1″][vc_custom_heading heading_semantic=”h1″ text_size=”h1″ text_color=”color-xsdn”]Complex structures and financial instruments<\/span><\/span>\u00a0<\/span>[\/vc_custom_heading][vc_empty_space empty_h=”2″][vc_separator sep_color=”color-429748″][\/vc_column][\/vc_row][vc_row unlock_row_content=”yes” row_height_percent=”0″ override_padding=”yes” h_padding=”5″ top_padding=”3″ bottom_padding=”2″ overlay_alpha=”50″ gutter_size=”3″ column_width_percent=”100″ shift_y=”0″ z_index=”0″][vc_column width=”1\/1″][vc_custom_heading heading_semantic=”h3″ text_size=”h3″]Case: Valuation of a convertible bond<\/span><\/span>\u00a0<\/span>[\/vc_custom_heading][vc_separator el_width=”22%” el_height=”2px”][vc_column_text]We were commissioned to value a complex structured convertible bond, the interest rate of which was partly dependent on the company’s performance and the exercise of which was mandatory in the case of certain exit events and optional in the case of others. The aim was to develop a valuation model in accordance with IFRS 9 that would be used for accounting purposes and could also be used as a basis for regular revaluations. In addition, the notes to the financial statements were to be prepared.<\/span>\u00a0<\/span><\/p>\n

The valuation of such hybrid financial instruments with equity and debt characteristics places high demands on the modelling of future cash flows and valuation parameters. In this specific case, particular attention was paid to the systematic modelling of the various exit events, their probabilities of occurrence and their correlation with the underlying enterprise value. In particular, it had to be worked out that certain exits – such as an IPO – appear increasingly likely as the company valuation increases, while others, such as a financing round, appear more plausible in lower valuation ranges.<\/span>\u00a0<\/span><\/p>\n

A critical success factor in the modelling was therefore initially the probabilistic recording of the exit events, including the timing-related dimension, which we mapped using stochastic processes. Building on this, the relationship between the specific exit scenario and the company value when the event occurs was formalised. In order to capture this consistently, we anchored the valuation in a risk-neutral valuation framework. The necessary calibration of key parameters – in particular volatilities, exit probabilities and adjusted risk-neutral growth rates – was carried out using capital market benchmarks and plausibility checks based on the share price data of comparable companies and market volatility data.<\/span>\u00a0<\/span><\/p>\n

Another key modelling aspect was the mapping of the cash flows, which are influenced by both the development of the company’s value and the exit constellation. This was of importance in particular in the case of performance-related interest payments, the amount of which was linked to certain profit development of the company. In order to map these dynamics appropriately, a simulation-based method was developed that maps both the stochastic paths of the company value and the resulting cash flows for all scenarios.<\/span>\u00a0<\/span><\/p>\n

The result was a modular valuation model that transparently illustrates the valuation logic and is equipped with a sensitivity calculation that clearly shows the effects of key parameter changes. In addition, a structured description of the notes was designed, which documents the accounting approach, the methods used and key assumptions in a way that is appropriate for the target audience. The model is also suitable for future continuous measurement as part of periodic financial statements.<\/span>\u00a0<\/span><\/p>\n

Overall, the model was able to fulfil both the regulatory requirements of IFRS 9 and create a reliable measurement basis for internal decision-making processes – with a particular focus on the traceability of a complex hybrid instrument in a stochastically uncertain environment.<\/span>\u00a0<\/span>[\/vc_column_text][vc_accordion][vc_accordion_tab gutter_size=”2″ column_padding=”2″ title=”Critical points:” tab_id=”1680094299-1-3″][vc_column_text]<\/p>\n