security valuation model

Security Valuation Model

Any model used to estimate the appropriate price of a security. This helps investors make investment decisions on which securities are undervalued and are therefore good to buy and likewise, which are overvalued and good to sell. All security valuation models use a series of mathematical relationships to make their determinations. As with all things, some models are more accurate than others.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

security valuation model

An analytic tool for valuing securities in which a series of mathematical relationships is used to determine the price at which a security should sell. Accuracy using a model depends not only on the validity of the relationships, but also on the precision of the estimates of other variables required by the model. One widely used security valuation model discounts estimated cash flows, such as dividends or interest, from holding an investment.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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