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 firstname.lastname@example.org. Good luck!
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