Method for estimating expected cash flow of an investment...

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Reexamination Certificate

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Reexamination Certificate

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07657478

ABSTRACT:
A method for estimating future cash flows of an investment instrument (or portfolio of investment instruments) is performed by simulating past performance (i.e., cash flows) similar instruments based on actual data of past performance, using the simulated past performance to generate a distribution of possible future performance outcomes of the investment instrument, and using the distribution of possible future performance outcomes to make estimates of the expected cash flow from the investment instrument. In one embodiment, cash flow time series of private equity funds (J-curves) are simulated for fully-liquidated vintage years by scaling an aggregate net cash flow time series from a plurality of fully liquidated funds for that vintage year. The time series is scaled by scalar coefficients calculated based on statistics of the four parameters, internal rate of return, money multiple, depth of curve, and speed to depth, of the aggregated vintage fund J-curves.

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Heckman, James J. Earnings Functions, Rates of Return, and Treatment Effects: the Mincer Equation and Beyond. National Bureau of Economic Research. Aug. 2005.
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Anderson, Gary A. Project Holding-Period Rate of Return and the MIRR.
Murray, Gordon C. Why has the investment performance of technology-specialist, European venture capital funds been so poor?

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