Advanced methodologies for valuing banking institutions in merger and acquisition transactions

Posted: Aug 14, 2024

• Prof. Isabella Ahmed
• Prof. Leo Kowalski
• Prof. Liam Rossi

Abstract

The valuation of banking institutions in merger and acquisition transactions represents one of the most complex challenges in financial engineering, requiring sophisticated methodologies that can account for multiple dimensions of risk, regulatory constraints, and market dynamics. Traditional valuation approaches, while providing foundational frameworks, often fail to capture the intricate interdependencies between capital adequacy requirements, asset quality metrics, and earnings sustainability in rapidly evolving financial markets. This research addresses these challenges by developing a novel hybrid valuation framework that integrates quantum-inspired computational methods with multi-dimensional risk assessment techniques. The methodology represents a significant departure from traditional approaches by incorporating quantum amplitude estimation algorithms to model the probabilistic nature of banking institution valuations, while simultaneously accounting for regulatory compliance costs and systemic risk exposures through a sophisticated multi-factor analysis.