is not accurate; there are better ways of accomplishing the task of valuation. Cash vs. Profits Another way to value the firm is to consider the future flow of cash. Since cash today is worth more than the same amount of cash tomorrow, a valuation model based on cash flow can discount the value of cash received in future years, thus providing a more accurate picture of the true impact of
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Corporate Finance Fundamentals [FN1] Examination Blueprint 2010–2011 Purpose The Corporate Finance Fundamentals [FN1] examination has been constructed using an examination blueprint. The blueprint, also referred to as the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the topics, the level of competence for each topic, and the related learning objectives. The learning objectives have been designed
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Chapter 4: The Basics of Risk Chapter 5: Option Pricing Theory and Models Chapter 6: Market Efficiency: Theory and Models Chapter 7: Riskless Rates and Risk Premiums Chapter 8: Estimating Risk Parameters and Costs of Financing Chapter 9: Measuring Earnings Chapter 10: From Earnings to Cash Flows Chapter 11: Estimating Growth Chapter 12: Closure in Valuation: Estimating Terminal Value Chapter 13: Dividend Discount Models Chapter 14: Free Cashflow to Equity Models Chapter 15: Firm Valuation: Cost of Capital
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capital structure choice, payout policy, the effective use and valuation of derivative securities (futures, options), and risk management. 1 COURSE MATERIALS Textbook The textbook for the course is: Corporate Finance (plus MyFinanceLab), Jonathan Berk and Peter DeMarzo, 3rd ed., Pearson - Prentice Hall, 2014. (SBN-10: 0-13-342415-4; ISBN-13: 978-0-13342415-7) There are several options for accessing the book and MyFinanceLab. You can purchase the book with MyFinanceLab. You can purchase
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Welcome to Financial Models in Excel Situation report 1 / 17 • Peter Raahauge Department of Finance Office: A 5.21, Solbjerg plads Background: ˚ – PhD in economics (Arhus) 1999 – System developer (Simcorp) 1999-2000 – Assisting/Associate Professor/Lecturer (CBS) 2000-2012 2 / 17 • Goal The overall goal • Practical implementation of financial theory How to get there? • Exercise-based (solving “real world” problems) • IT-based, everything based on Excel (and VBA) • Professional
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data only reflects historical information, which is not appropriate for derivatives pricing. Therefore, we use Merton Model to calculate CEU’s default probability. The Merton Model proposed by Robert Merton characterizes a company’s equity as writing a call option or buying a put option on the assets of the company with maturity T and a strike price equal to the face value of the debt. The implied volatility from options can be regarded as the expected probability of default. Currently, CEU’s market
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managing various types of financial risks. While doing so, students would understand the organizational aspects of those risk functions and their roles & responsibilities. The emphasis is on mechanics, properties and valuation of forwards, futures, options and swap instruments. In covering these instruments, cases, examples and notes would be sought from markets so as to provide a holistic view of the financial market structure i.e., currency, fixed income, equity and money markets. Cases discussed
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sheets. This is a closed book exam. Calculators are permitted. Good luck! Exercise 1 (3 points) TRUE/FALSE questions Are the following statements true or false? Justify all your answers in maximum 3 lines each. a) According to the Capital Asset Pricing Model (CAPM), in equilibrium, all securities lie on the security market line. (1 point) TRUE: The SML depicts risk/return relationships where the risk measure is beta. In equilibrium, all securities are fairly priced and lie on the SML (not below
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and the Time Value of Money b. Concept of Zero Coupon (Discount) Bonds and Coupon Bonds. c. Bond Characteristics d. Bond Types – Fixed Rate, Floating Rate, Inverse Floater Rate, etc. e. Interest Rates – Discrete and Continuous Compounding f. Bond Pricing – using ZCYC or YTMC with discrete compounding or continuous compounding g. Difference between bond coupon rate and bond yield h. Calculating Bond Yield (YTM, CY, MMY, ZCY/Spot, Par Yield, etc.) i. Price Yield Relationship Introduction to Financial
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Commercial Banking The first category of credit risk models are the ones based on the original framework developed by Merton (1974) using the principles of option pricing (Black and Scholes, 1973). * the default process of a company is driven by the value of the company’s assets and the risk of a firm’s default is therefore explicitly linked to the variability of the firm’s asset value. * The basic intuition behind the Merton model is relatively simple: default occurs when the value of
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