👉 Mathematical Valuation (MathVal) is a framework used to assess the value of complex financial instruments, particularly those with embedded options or path-dependent features. It combines principles from valuation theory, stochastic calculus, and financial economics to model the underlying asset's behavior over time and the embedded options' impact on value. MathVal typically involves constructing a stochastic process for the asset price, determining the option's payoff under various scenarios, and then discounting these payoffs back to the present value using appropriate risk-free rates and volatility assumptions. This approach allows for a comprehensive valuation that accounts for uncertainties and dynamic market conditions, making it especially useful for derivatives like Asian options, barrier options, and other path-dependent securities.
