Thinking of doing complex financial valuations?

BVWireIssue #195-2
December 12, 2018

valuation methods & approaches
financial instruments, black scholes option pricing model, statistics, debt valuation

Want to move from standard business appraisals to valuations of derivatives, guarantees, exotics, complex securities, and the like? You’ll need a strong background in economics and mathematics, advises Gary Schurman of Applied Business Economics, who recently conducted a BVR webinar, Portfolio Equations and Applications in Valuation. His firm specializes in financial valuation, capital markets advisory, and analytics.

Take this quiz: If you think you can tackle these engagements, first try answering the following questions. These are questions that a competent appraiser within this niche should be able to answer quite easily, and they may be posed by a client trying to see whether you know what you’re doing:

  • What is discrete time and continuous time and how do they differ?
  • How does standard calculus differ from stochastic calculus?
  • What are risk-neutral probabilities and how do they differ from actual probabilities?
  • Explain the Black-Scholes PDE (Partial Differential Equation).
  • Explain bond duration and convexity and the relevant Taylor Series Expansion.
  • Explain numerical integration and under what circumstances it is used.
  • Under what conditions can a square matrix not be inverted?

To check your answers, you can email Gary at gschurman@appliedbusinesseconomics.com. Good luck!

Please let us know if you have any comments about this article or enhancements you would like to see.