In the valuation theory department of economics, the Transactional Asset Pricing Approach (TAPA) is a general reconstruction of asset pricing theory developed in 2000s by a collaboration of Russian and Israeli economists Vladimir B. Michaletz and Andrey I. Artemenkov. It provides a basis for reconstructing the discounted cash flow (DCF) analysis and the resulting income capitalization techniques, such as the Gordon growth formula (see dividend discount model ), from a transactional perspective relying, in the process, on a formulated dynamic principle of transactional equity-in-exchange.
General overview TAPA approach originates with the framing of the dynamic inter-temporal principle of transactional equity-in-exchange for buyers and sellers in an asset transaction, the essence of which is that by the end of the analysis projection period n {\displaystyle n} neither party should be a losing side to the transaction, meaning that the capital of the buyer and the seller bound up in the transaction should be mutually equal at the end of Period n {\displaystyle n} . In TAPA, this dynamic valuation predicate forms an underlying new basis for justifying DCF analyses distinct, on the one hand, from the specific-individual-investor DCF premise developed by the American Economist Irving Fisher in his Theory of Interest 1930 book and the perfect-competitive-market-approach to justifying DCF, developed by Merton Miller and Franco Modigliani in their seminal Dividend policy and growth Paper, on the other hand. Since the Transactional approach to asset valuation, whose genesis can be traced back to Book V of Nicomachean Ethics, implies a distinct accounting for economic interests of both parties to a transaction with an economic asset, the buyer and the seller, it proceeds from developing a dual rate asset pricing model, which is complemented by a deductive-style multi-period discount rate derivation theory, originating as a generalization of the single-period discount rate framework of Burr-Williams, where the single-period discount rate, r, is conceptualized as being constituted of the current income R {\displaystyle R} component and the capital value appreciation v {\displaystyle v} component for a single asset or a portfolio aggregate:
r = R + v {\displaystyle r=R+v} . The multi-period discount rate evaluation theory within TAPA, on the other hand, is a portfolio-level theory, in that it applies to an investment aggregate. A general formula for evaluating discount rates/rates of return at a portfolio-level in TAPA looks as follows
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