Search results “Real options valuations”
What is REAL OPTIONS VALUATION? What does REAL OPTIONS VALUATION mean? REAL OPTIONS VALUATION meaning - REAL OPTIONS VALUATION definition - REAL OPTIONS VALUATION explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. exercise the options. Real options analysis, as a discipline, extends from its application in corporate finance, to decision making under uncertainty in general, adapting the techniques developed for financial options to "real-life" decisions. For example, R&D managers can use Real Options Valuation to help them allocate their R&D budget among diverse projects; a non business example might be the decision to join the work force, or rather, to forgo several years of income to attend graduate school. It, thus, forces decision makers to be explicit about the assumptions underlying their projections, and for this reason ROV is increasingly employed as a tool in business strategy formulation. This extension of real options to real-world projects often requires customized decision support systems, because otherwise the complex compound real options will become too intractable to handle. Whereas business managers have been making capital investment decisions for centuries, the term "real option" is relatively new, and was coined by Professor Stewart Myers of the MIT Sloan School of Management in 1977. It is interesting to note though, that in 1930, Irving Fisher wrote explicitly of the "options" available to a business owner (The Theory of Interest, II.VIII). The description of such opportunities as "real options", however, followed on the development of analytical techniques for financial options, such as Black–Scholes in 1973. As such, the term "real option" is closely tied to these option methods. Real options are today an active field of academic research. Professor Lenos Trigeorgis has been a leading name for many years, publishing several influential books and academic articles. Other pioneering academics in the field include Professors Eduardo Schwartz, Gonzalo Cortazar, Michael Brennan, Han Smit, Avinash Dixit and Robert Pindyck (the latter two, authoring the pioneering text in the discipline). An academic conference on real options is organized yearly (Annual International Conference on Real Options).
Views: 8453 The Audiopedia
Session 21: IPO and VC Valuation & First Steps on Real Options
In today's class, we put the finishing touches on private company valuation by looking at key questions that arise in private company valuation (illiquidity, key person etc.) and then looked at valuing IPOs. In particular, the question of what happens to the proceeds from an offering can affect value per share, and the offering price itself is subject to the dynamics of the issuance process, with investment bankers more likely to under price than over price offerings. In the second part of the class, I did a quick introduction to real options, setting up the intuitive rationale for real options. We covered the basics of options, starting with why real options are so attractive to analysts and investors: they allow you to add a premium to your DCF value. The two building blocks for real option value are learning (from what is going on around you or ongoing events) and adapting your behavior. There are three questions that underlie the use of real options. The first is recognizing when you are dealing with an option, with a payoff diagram being the give away. The second is looking for exclusivity which is what gives options value. The third is using an option pricing model, which is built on replication and arbitrage. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvtco2test.pdf Slides: Part 1: http://www.stern.nyu.edu/~adamodar/podcasts/valfall16/valsession21A.pdf Part 2: http://www.stern.nyu.edu/~adamodar/podcasts/valfall16/valsession21B.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Asoln.pdf
Views: 3721 Aswath Damodaran
Black-Scholes Option Pricing Model -- Intro and Call Example
Introduces the Black-Scholes Option Pricing Model and walks through an example of using the BS OPM to find the value of a call. Supplemental files (Standard Normal Distribution Table, BS OPM Formulas, and BS OPM Spreadsheet) are provided with links to the files in Google Documents. tinyurl.com/Bracker-StNormTable tinyurl.com/Bracker-BSOPM tinyurl.com/Bracker-BSOPMspread
Views: 240126 Kevin Bracker
Getting Real with Biotech Valuation
This webinar provides insight into unique methods employed when valuing products and  companies in biotech. For example: How is a DCF model different for these high growth drug R&D companies? What are Real Options and when should they be used? If you have a background in finance, are new to the world of biotech valuation, or are new to the Real Options approach to valuation, then this webinar is for you. These distinguished speakers were featured on the panel: -Vladimir Antikarov, Verea Group LLC, Principal -Patrik Frei, Venture Valuation, CEO -David Thomas, BIO, Director of Industry Research & Policy Analysis (Moderator)
PEAT Video 04 - Real Options Valuations
Performing, modelling and valuing Strategic Real Options and Financial Options. Methods include Customized American, Bermudan, and European Options on Abandonment, Contraction, Expansion, and Multiple Phased Complex Sequential Compound Options coupled with Monte Carlo Risk Simulation and Dynamic Sensitivities. Download it at http://www.oslriskmanagement.com/solutions/project-economic-analysis-tool
Excel Real Options Valuation Template
The Excel Real Options Valuation Template by Business Spreadsheets (http://www.business-spreadsheets.com/realopt.htm) provides quantification of embedded value in potential business and investment strategies. Uncertainty surrounding potential cash flows from real options that exist from alternative strategic outcomes can be assessed for the valuation of their potential. Real options can include multiple branch outcome possibilities competitive environment scenarios or options to abandon, expand or delay proposed projects.
Views: 4491 Business Spreadsheets
Basic Introduction to Real Options SLS
REAL OPTIONS SLS is a standalone software and spreadsheet accessible add-in for analysing and valuing real options, financial options, exotic options and employee stock options and incorporating them into decision-making models. With REAL OPTIONS SLS, decision makers can correctly do project valuations and eliminate the possibility of undervaluing the strategic value of particular projects. Download it at http://www.oslriskmanagement.com/software/real-options-sls
Snap, the Perishable Picture Company: Valuing the IPO
Toward the end of 2016, Snap (formerly known as Snapchat) became the latest of the social media companies to enter the public market. With 161 million engaged users but little in terms of current revenues & big operating losses, Snap fills the bill as a company with lots of potential but plenty of peril. In this post, I tell my story for Snap and the value that emerges from it. It is, for the most part, an optimistic story of a young company that has found a niche in the crowded social media space. In my story, Snap will not and should not try to be the next Facebook but I also see it as avoiding becoming Twitter Redux. Tell your own story and make your storyline into a value! Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/SnapIPO.pdf Blog Post: http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.html Links Snap Prospectus:https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htm Snap IPO valuation (my base story): http://www.stern.nyu.edu/~adamodar/pc/blog/SnapIPOFeb2017.xls Snap as Facebook Light: http://www.stern.nyu.edu/~adamodar/pc/blog/SnapFacebookLite.xls Snap as Twitter Redux:http://www.stern.nyu.edu/~adamodar/pc/blog/SnapTwitterredux.xls Snap Simulation: http://www.stern.nyu.edu/~adamodar/pc/blog/SnapSimulation.pdf
Views: 18198 Aswath Damodaran
PEAT Video 09- Real Options Strategies and Decision Trees
PEAT allows users analysing and valuing real options, financial options, exotic options and employee stock options and incorporating them into decision-making models. As a fundamental part of Real Options analysis, users can also use the embedded decision trees tools for options formulation and visualisation. Consequently, decision makers can correctly do project valuations and eliminate the possibility of undervaluing the strategic value of particular projects. Download it at http://www.oslriskmanagement.com/solutions/project-economic-analysis-tool
Views: 103 OSL Risk Management
Pricing an American Option: 3 Period Binomial Tree Model
We price an American put option using 3 period binomial tree model. We cover the methdology of working backwards through the tree to price the option in multi-period binomial framework. Empahsis is also placed on early exercise feature of American option and it's significance in pricing. Although not a prerequisite, viewers can look at the tutorial on risk neutral valuation in binomial model for understanding how to calculate risk neutral probability of stock price going up.
Views: 76467 finCampus Lecture Hall
Real Estate Valuation Methods
How do you determine the value of real estate? There are 3 popular techniques for real estate valuation. Two of them come with a warning that they aren't usually the most accurate, yet they are the most common. Investing in real estate is all about the numbers, and if you having accurate numbers will make it much more likely that you invest in the right properties. The third method I'll share with you will blow you out of the water for giving you the most accurate information. In real estate we are looking for a crystal ball. Because a property is only worth what someone is willing to pay, when we are looking to buy a home, we need to have some concept of what people will pay for it in the future. Watch and Enjoy! Kris Krohn & Nate Woodbury WORK WITH KRIS: ======================== Limitless 3 Day Event: http://bit.ly/2j5r8wM Get Personal Mentoring: http://bit.ly/2lPGp9d Partner on Property with Kris: http://bit.ly/2lPGp9d Real Estate Investing Help: http://bit.ly/2lPGp9d Free Real Estate Audiobook: http://bit.ly/2oiORxy Free Conscious Creator Audiobook: http://bit.ly/2sZmaYU EQUIPMENT ======================== Camera: http://amzn.to/2oRnnAA Favorite Lens: http://amzn.to/1QEqTF4 External Mic: http://amzn.to/1Sx8Jq0 Camera Backpack: http://amzn.to/2oy5JAR MUSIC ======================== Tobu - Infectious https://www.youtube.com/watch?v=ux8-EbW6DUI Artist: https://www.youtube.com/tobuofficial Licensed under Creative Commons — Attribution 3.0 Unported— CC BY 3.0 Support This Channel: ======================== ==SUBSCRIBE== http://bit.ly/1TOqKBN ==LIKE== Your "Likes" help more people find our videos. ==COMMENT== Comment and ask Questions ==PATREON== https://www.patreon.com/REInvestorTV ==AMAZON== Any time you plan on making a purchase on Amazon, visit one of my videos first, and click one of the 'amzn' links above. Then, anything you navigate to and purchase in the next 24 hours on Amazon, will give this channel a small percentage. Thanks for your support!!! ======================== Video by Nate Woodbury (The Hero Maker) BeTheHeroStudios.com http://YouTube.com/NateWoodburyHero
Views: 15216 Kris Krohn
Real options1
We designed this two-day course specifically to instruct participants in the areas of outright, embedded and real options, physical assets, hedging future cash flows of assets, optimization of allocation of assets, flexibility, pricing of options, valuation of real options and Greek variables as indicators for sensitivities.
FRM: Binomial (one step) for option price
The binomial solves for the price of an option by creating a riskless portfolio. For more financial risk videos, visit our website! http://www.bionicturtle.com
Views: 148927 Bionic Turtle
Binomial Option Pricing: Tutorial on Risk Neutral Valuation
www.investmentlens.com We describe the risk neutral valuation approach to price an option using a one period binomial tree model. The approach can be easily extended to price derivatives using multi-period binomial treel.
Views: 25568 finCampus Lecture Hall
Session 20: Private Company Valuation
Examine the estimation challenges associated with valuing small or large privately-owned businesses.
Views: 34481 Aswath Damodaran
Session 2: Valuation - The Bermuda Triangle and Approaches to Valuation
In this session, I start with a test of how bias contaminates valuations and then I look at the three broad approaches that all valuation models can be categorized into: intrinsic valuation, pricing and real options,. I provide a summary of what each approach is built around and the market mistake that each one is designed to exploit, and explain why there is no one right approach. It is dependent not only on what type of asset/business you have been asked to put a number to, but your characteristics as an investor. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/biastests.pdf & answers: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/biastestsanswers.pdf Slides for class: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/Valintrospr19.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2asoln.pdf
Views: 9506 Aswath Damodaran
Session 20: Private Company Valuation
In today’s class, we completed the last few strands of sum of the parts valuation (not pricing) and then started on the discussion of private companies. After laying down the base principle, which is that the fundamentals that drive private company value are the same that drive public companies, we began looking at why motive matters with private company valuation, since the same business can be worth different amounts to different buyers. In terms of specifics, we looked at the challenges of undiversified buyers, illiquidity and key person effects in private-to-private transactions and how they all go away when the buyer is a public company. Next session, we will start on valuing/pricing IPOs and then move on to real options. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvtcotest.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valfall16/valsession20.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Asoln.pdf
Views: 6058 Aswath Damodaran
IPO Valuation Model
In this tutorial, you’ll learn what an “IPO valuation” really means, how to model an initial public offering (IPO) transaction, and what an IPO model tells you about the company and its possible valuation multiples before and after going public. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 4:17 The Rationale and Assumptions Behind an IPO 7:47 Pricing vs. Trading Equity Value in an IPO 12:38 Primary vs. Secondary Shares and the Greenshoe or Overallotment Provision 16:10 Deal Size & Net Proceeds to Issuer 19:31 Implied Valuation Multiples 21:08 Alternate IPO Model Driven by Offering Price per Share and Shares Sold/Issued 24:05 Recap and Summary Lesson Outline: We get a lot of questions about "IPO valuation" or "IPO modeling," but the truth is that it’s really simple because you don't, in fact, "value" a company in an IPO. Instead, you simply value a company and then decide how its valuation might be different in an IPO (e.g., no private company discount). Step 1: Assumptions & Setup You almost always start an IPO model with an idea of how much in funding the company wants to raise, and the multiples it may be valued at (based on public comps). The multiples used vary by industry, but 1-year forward P / E multiples are very common (e.g., go to the next full fiscal year and assume a multiple for that projected full-year figure). Here, we’d pick forward multiples from similar, profitable social networking / mobile messaging companies (not covered in this tutorial in the interest of time). Amount of Capital to Raise: Very discretionary and it comes down to the company's plans, how many existing shareholders want to sell, whether it's PE or VC-backed, etc. This is often set to 20-40% of a company's value; common to sell ~1/4 or ~1/3 of the company in a public offering, though that also varies. Step 2: Trading vs. Pricing and the Pricing Discount You apply the assumed multiple to the company's relevant metric, so Forward Net Income in this case, which gets you the "Post-Money Equity Value @ Trading." This is what the company's market cap should be after it has raised the capital and is trading on the stock market. So we can then calculate the Post-Money Equity Value at Trading (the market rate) vs. Pricing (the discounted rate that institutional investors get). And then calculate the Implied Offering Price per Share based on this - take this value, subtract the funds raised, and divide by the company's current share count. Step 3: Determining the Primary vs. Secondary Shares and the "Greenshoe" (Overallotment) Provision "Primary Shares" are newly created shares that represent actual capital being raised in the deal - this capital then goes to the company in the form of cash. "Secondary Shares" represent existing investors selling their stakes to new investors (usually large institutions like Fidelity). No capital is raised here. Formulas: Always determine the Primary Shares first, based on the Post-Money Equity Value @ Pricing and/or the amount of capital raised… and then figure out the Secondary Shares in relation to that. Have to also figure out split between "Base Offering" and "Greenshoe" - "Greenshoe" is an option to issue even more shares if demand is strong enough. Used for cases where the company wants to keep the same offering price, but simply raise more capital if more investors are interested. Very commonly set to ~15% in offerings in developed markets. Step 4: Net Proceeds to Issuer Look at Total Offering Size first (Primary + Secondary + Overallotment) and then subtract out fees. Underwriting Discount: Banks used to, and sometimes still do, buy a portion of the company's stock as "insurance" in case the company can't sell it to anyone else… so this is supposed to compensate them for the risk of holding the stock temporarily, in case it can't find any buyers. Bigger deal = lower fee % in most cases. % Company Sold: Based on Primary Proceeds and Post-Money Equity Value @ Pricing - how much the company sold of itself just before it started trading publicly. Step 5: Valuation Multiples We move from Equity Value to Enterprise Value as we normally do… but we must factor in the cash raised in the IPO now! Equity Value implicitly reflects this cash, so it must be subtracted when calculating the new Enterprise Value. Would have to compare these multiples to those of the public comps to decide whether or not they look reasonable. RESOURCES: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/107-09-IPO-Valuation-Model.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/107-09-IPO-Valuation-Model.pdf
Easy Binomial Trees in Excel
This is a quick guide on how to do binomial trees in Excel. These tree's are used for options pricing, but I won't be going into details about that. If you want to learn more, there is a bunch of material over at Investopedia.com I recommend going over these videos if you're not familiar with some of the concepts in the video. Cell Referencing Nested If-Statements: https://youtu.be/winLWOdAvfs
Views: 20069 Excel Video Tutorials
Valuation Tools Webcast #9: Dealing with Employee Options
In this webcast, I look at the process of valuing employee options and incorporating that value into the value of equity per share. I use Cisco to illustrate. Cisco 10K: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/webcasts/EmployeeOptions/cisco10K.pdf Cisco Option spreadsheet: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/webcasts/EmployeeOptions/ciscooptions.xls
Views: 2340 Aswath Damodaran
Real Options SLS Video 02- Using SLS Functions in Excel
SLS Functions are part of REAL OPTIONS SLS, which is a spreadsheet accessible add-in for analysing and valuing real options, financial options, exotic options and employee stock options and incorporating them into decision-making models. Download it at http://www.oslriskmanagement.com/software/real-options-sls
FRM: Using Excel to calculate Black-Scholes-Merton option price
This is Black-Scholes for a European-style call option. You can download the XLS @ this forum thread on our website at http://www.bionicturtle.com.
Views: 154049 Bionic Turtle
Bank Valuations vs Market Value
Andrew from http://www.intuitivefinance.com.au with this month's update on all things interest rates. Follow us on twitter on @IntuitiveFinanc
Views: 424 Andrew Mirams
How to Value a Company in 3 Easy Steps - Valuing a Business Valuation Methods Capital Budgeting
Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy.. Just for instance I possessed a company comprising of a neighborhood store. To put together that center, I invested $1,000 one year ago on apparatus along with other assets. The equipment in addition to other assets have depreciated by 10% in a single year, so now they're valued at only $900 inside the accounting books. In case I was going to make an effort to offer you this company, what amount would an accountant value it? Relatively easy! $900. The cost of the whole set of assets (less liabilities, if any) can give accountants the "book value" of a typical organization, and such is systematically how accountants observe the worth of an enterprise or company. (We employ the use of the word "book" because the worth of the assets are penned within the company's accounting "books.") http://www.youtube.com/watch?v=6pCXd4i7DM0 However, imagine this unique company is earning a juicy cash income of $2,000 annually. You would be landing a mighty incredible deal in the event I sold it to you for just $900, right? I, on the flip side, might be taking out a pretty sour pact in the event I offered it to you for just $900, on the grounds that as a result I will take $900 but I will shed $2,000 per annum! Due to this, business directors (dissimilar to accountants), don't make use of merely a company's book value when assessing the value of an organization.So how do they see how much it really is worth? To replace utilizing a business' books or even net worth (the market price of the firm's assets minus the business enterprise's liabilities), financial managers opt to source enterprise worth on how much money it gets in relation to cash flow (real cash acquired... contrary to only "net income" that may not generally be in the format of cash). Basically, a company making $1,000 "free cash flow" monthly having assets worth a very small $1 would remain to be worth a great deal more versus a larger company with substantial assets of $500 in the event the humongous company is attaining only $1 yearly.So far, how do we achieve the exact value of your business? The simplest way would be to mainly look for the net present value of the total amount of long run "free cash flows" (cash inflow less cash outflow).Needless to say, you will come across much more sophisticated formulas to find the value of a company (which you wouldn't genuinely need to learn in detail, since there are numerous gratis calculators on the web), but practically all of such formulas are in a way driven by net present value of cash flows, plus they are likely to take into consideration a few factors for example growth level, intrinsic risk of the company, plus others.
Views: 315915 MBAbullshitDotCom
Aswath Damodaran: Valuation, Companies Life Cycle and Technology Companies (2018)
A presentation by professor of corporate finance and equity valuation, Aswath Damodaran. In this interview, Aswath discusses the life cycles of a company and how this affects its valuation. Aswatch also talks about the difference in life cycles between tech and non-tech companies.📚 Books by Aswath Damodaran are located at the bottom of the description❗ Like if you enjoyed Subscribe for more:http://bit.ly/InvestorsArchive Follow us on twitter:http://bit.ly/TwitterIA Other great Stock Market Investor videos:⬇ Ray Dalio on Hedge funds, Success and Life/Work: http://bit.ly/RDVid1 Charlie Munger on Common sense and Investing:http://bit.ly/CMVid1 Video Segments: 0:00 Introduction 2:52 Financial balance sheet 4:23 Corporate life cycle 7:09 The detriments of the life cycle 8:29 Tech vs Non-tech life cycles 11:20 Corporate finance 13:33 Corporate finance shift 15:00 Companies, act your age! 17:41 The cash flows over the life cycle 21:20 Reality checks 22:29 Value = Story + Numbers Aswath Damodaran Books 🇺🇸📈 (affiliate link) The Little Book of Valuation:http://bit.ly/LittleBookOfValuation The Dark Side of Valuation:http://bit.ly/DarkSideOfValuation Applied Corporate Finance: http://bit.ly/AppliedCorporateFinance Investment Philosophies:http://bit.ly/InvestmentPhilosophies Interview Date: 26th September, 2018 Event: Nordic Business Forum 2018 Original Image Source:http://bit.ly/ADamodaranPic Investors Archive has videos of all the Investing/Business/Economic/Finance masters. Learn from their wisdom for free in one place. For more check out the channel. Remember to subscribe, share, comment and like! No advertising. #InvestorsArchive
Views: 6246 Investors Archive
Session 14: Relative Valuation - First Principles
Develop a four-step process for deconstructing, understanding and using multiples
Views: 42149 Aswath Damodaran
Session 23: Distressed Equity as an option
We started today's class by looking at valuing the option to abandon, and how being able to get out of a commitment can add value to it. We then looked at financial flexibility as an option, and argued that it was worth more to capital-constrained companies with unpredictable and high-value-added investments. We continued with our examination of equity in trouble, debt-laden companies. Given that the equity in these companies takes on the characteristics of an option, we teased out implications for investing in risky projects, financing and conglomerate acquisitions. Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/realoptions2mod.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valfall15/valsession23.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23test.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23soln.pdf
Views: 1783 Aswath Damodaran
The valuation of mergers and acquisitions (part 1) - ACCA (AFM) lectures
The valuation of mergers and acquisitions (part 1) Free ACCA lectures for the Advanced Financial Management (AFM) Exam Please go to OpenTuition to download the AFM notes used in this lecture, view all remaining Advanced Financial Management (AFM) lectures, and post questions on the Ask the ACCA AFM Tutor Forums - We do NOT provide support on the youtube comments section. *** Complete list of free ACCA lectures is available on https://opentuition.com/acca/afm/ ***
Views: 7975 OpenTuition
Session 19: Asset Based Valuation
Look at valuation approaches (accounting book value, sum of the parts) that value the assets of a business and aggregate up to value.
Views: 20153 Aswath Damodaran
Checklist for Survival -  A Real World Valuation
John Stewart of QP Consulting, Inc. presents Checklist for Survival - A Real World Valuation http://www.quickconsultant.com
Views: 271 qkconsultant
Monte-Carlo Approach to  Exploration Portfolio Valuation - April 24, 2013 - CFA Calgary
Monte-Carlo Approach to Exploration Portfolio Valuation FEATURED SPEAKER Justin Anderson, CFA Salman Partners Inc. How often have we heard that the "Exploration Portfolio" of an E&P company is a "free option" or "you get the exploration upside for free"? The reason analysts and investors view exploration as "free upside" is due in part to the difficulty of properly valuing this often important piece of the business. However, Africa Oil (TSXv : AOI) is an over $1.5B dollar company with exploration assets that comprise 100% of its value -- I'm not sure buyers of AOI stock would consider the exploration upside a "free" option... The bottom line: Difficult to value does not equal no value. The lesson of AOI, and many other E&Ps, is that reference to "free option" value in exploration is a kind of valuation cop-out. Exploration does have value -- the question is how much. The value may even be negative, and hence, neither "free" nor a downside-constrained "option". Deterministic methodologies (such as the "Risked NAV" approach) which improperly assess value are likely contributing to the dubious "free option" notion. This presentation will review the Monte Carlo approach to exploration portfolio valuation (and the careful technique necessary to avoid garbage in / garbage out) and will include an assessment of the unique approach's ability to pick stocks by back-testing its recommendations through a comprehensive, unbiased and repeatable performance test. BIOGRAPHY Justin Anderson, Salman Partners Inc. Justin completed a BSc. in Mechanical Engineering and a BS in Russian Studies at the University of Calgary. He then completed a MS in Aeronautical Engineering at MIT with his research and thesis focused on energy economics. While at MIT, Justin founded and commercialized a high-tech company called "Waybe" (www.waybe.ca) and was an executive chair of the MIT Energy Club. After completing his degree at MIT, Justin joined McKinsey & Company where he worked on energy company strategy and valuations. He then went to work for the investment banking energy group at BMO Capital Markets. After founding the research company "Xedge", a company specializing in rigorous stochastic (Monte Carlo) analysis of oil & gas exploration portfolios, Justin joined Salman Partners where he has been since December 2011. Since joining Salman Partners, Justin has initiated coverage on 19 Canadian-listed E&P companies operating in Latin America and Africa. Justin's use of the Monte Carlo approach for the valuation of the exploration portfolios has been applauded by energy companies and institutional investors with early indications suggesting the approach leads to significant alpha-generation.
Views: 3993 Justin Anderson
What do I do? Full-time independent stock market analyst and researcher: https://sven-carlin-research-platform.teachable.com/p/stock-market-research-platform Check the comparative stock list table on my Stock market research platform under curriculum preview! I am also a book author: Modern Value Investing book: https://amzn.to/2lvfH3t More about me and some written reports at the Sven Carlin blog: https://svencarlin.com Stock market for modern value investors Facebook Group: https://www.facebook.com/groups/modernvalueinvesting/ Knowing the intrinsic value of a stock is extremely important as it is the basis for your buy or sell decisions. Fortunately, it is not that difficult, all you need to do is know the business and estimate future earnings. Add a valuation to that and you have your intrinsic value. I discuss Skechers (NYSE: SKX) as an example for calculating intrinsic value and how stock values are much more volatile than intrinsic value.
Session 16: Intrinsic Value - Wrapping up
In today’s session, we continued our travels on the dark side, starting by valuing financial service companies (where loss of trust has driven us from dividend discount models), moving on to emerging market companies (with corporate governance, cross holdings and country risk all playing starring roles) and then looking at companies with intangible assets (where capitalizing R&D-like expenses can increase or decrease value) and to commodity and cyclical companies. I suggested that you use Monte Carlo simulations to bring in uncertainty into your valuations. We ended the class by drawing a contrast between value and pricing processes, a set up for the next phase of the class. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/dcfvaltests3.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session16.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session16Btest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session16Bsoln.pdf
Views: 3906 Aswath Damodaran
Session 22: Private Company Valuation - The Rest of the Story
In this session, we completed our discussion of private company valuation, starting with how to deal with illiquidity when valuing private businesses. We then looked at why the value of a private business will be higher to a public company or in an IPO and the special issues that arise from IPOs, including dealing with the IPO offer proceeds and the investment banking price guarantee. We closed the session byy looking at how to deal with expected transitions as a private company moves from a sole ownership to VC financing to a public offering. If you are interested in total betas and how different they are from market betas, by sector, you can get my estimates at the link below: http://www.stern.nyu.edu/~adamodar/pc/datasets/totalbeta.xls Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvtco2test.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr17/session22.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Ctest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Csoln.pdf
Views: 3208 Aswath Damodaran
CFA Level II: Alternative Investments:Private Equity Valuation- Part I  (of 3)
Video recorded during a live classroom session of CFA Level II.
Views: 12507 FinTree
Session 11: Loose Ends in Valuation
To get from operating asset value to equity value, we have to deal with cash, cross holdings and other assets first, then net out debt.
Views: 24555 Aswath Damodaran
DCF In Startup Valuation
Curious about your company valuation? Sign up for free at https://www.equidam.com/ This video explains why private companies are valued using discounted cash flow method and compares the private and public investment markets. To read more check out our article: https://www.equidam.com/dcf-in-startup-valuation/
Views: 2392 Equidam
Making Capital Investment Decisions Part 1
This video is part of a series of lectures that comprise an MBA level course in Corporate Finance. The lectures build on concepts and principals developed in previous lectures and, therefore, are best viewed in sequence. However, each lecture is divided into topics which can provide students (MBA and advanced undergraduates) with a helpful review of a specific topic. Persons preparing to take the CFA Exams will also find these lectures useful. The course consists of the following video lectures: 1. Investment Decisions and the Fundamentals of Value. 2. Financial Statements and Cash Flow (5 parts) 3. Discounted Cash Flow Valuation (6 parts) 4. Investment Decision Rules (5 parts) 5. Making Capital Investment Decisions (2 parts) 6. Valuation of Bonds (4 parts) 7. Stock Valuation (3 parts) 8. Lessons from Capital Market History (3 parts) 9. Risk and Return (3 parts) 10. CAPM (3 parts) 11. Risk and Capital Budgeting (3 parts) 12. Capital Budgeting Analysis (3 parts)
Views: 11610 shszewczyk
Session 20: Valuing Private Business (for sale and IPO)
In this session, we look at ways of dealing with the challenges of factoring in illiquidity and lack of diversification in private businesses as well as valuation for an IPO. Start of the class test:http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvtco2Modtest.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valspr15/valsession20.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20test.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20soln.pdf
Views: 3306 Aswath Damodaran
Session 29: Valuation - First Steps
Lay out different ways in which you can approach valuation and define the key drivers of value
Views: 10339 Aswath Damodaran
Session 2: The Bermuda Triangle of Valuation & the big picture
Today's class started with a test on whether you can detect the direction bias will take, based on who or why a valuation is done. The solutions are posted online. We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. With each approach, we talked about the types of assets that are best priced with that approach and what you need to bring as an analyst/investor to the table. For instance, in our discussion of DCF valuation and how to make it work for you, I suggested that there were two requirements: a long time horizon and the capacity to act as the catalyst for market correction. Since I mentioned Carl Icahn and Bill Ackman as hostile acquirers (catalysts), you may want to look at Herbalife, the company that Ackman has targeted as being over valued and Icahn did for being under valued. See if you can get a list going of how he is trying to be the catalyst for the correction... and think about the dark side of this process. We then started our discussion of intrinsic valuation, with a simple experiment on valuation, which led to three propositions about valuation. In the course of that discussion, I mentioned the weapons of mass distraction that people throw at us, as work through the numbers. Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/biastest.pdf Slides for the class: http://www.stern.nyu.edu/~adamodar/podcasts/valfall15/valsession2.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2test.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session2soln.pdf
Views: 13095 Aswath Damodaran
Session 14: More valuations on the dark side
In this session, we completed the discussion of young, growth companies, with a discussion of why valuation when uncertainty is greatest has the biggest pay off. We then moved on to mature companies in transition and looked at the depressing job of valuing declining and distressed companies. We ended with a discussion of emerging market companies. Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/dcfvaltests3.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valfall15/valsession14.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session14Atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session14Asoln.pdf
Views: 2105 Aswath Damodaran
CIMA F3 Lecture 3 - Business Valuations.avi
Recap of Lecture 3 - Business Valuations
Views: 12133 RCABelfast
Review of Residential Real Estate Analysis Valuation Methodologies
The purpose of this presentation is to provide an overview of the conventional residential real estate analysis valuation methodologies, and to explain two new analytical methodologies that have been developed by the founder of Adkins Capital Management in order to help prospective home buyers make a prudent home purchase decision.
Session 13: The Dark Side of Valuation (Valuing markets & young companies)
In this session, I first look at valuing entire markets and then at the process for valuing young companies. Start of the class test:http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/dcfvaltests2.pdf Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valspr15/valsession13.pdf Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/session13Atest.pdf Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/session13Asoln.pdf
Views: 2605 Aswath Damodaran
Session 17: Book Value Multiples
Look at the variables that cause book value multiples (price to book and EV to Investment Capital) to vary across companies and time.
Views: 22572 Aswath Damodaran
3 Minutes! Stock Valuation and Value Explained for How to Value a Stock
Wow Clicked Here http://www.youtube.com/watch?v=ccpJSkkPvdg and I'm shocked how EASY! Stock Valuation and Stocks Explained In 3 Minutes What is a “share of stock”? (Simply known as a “stock” for short). Basically, a stock is a certificate which proves that you own part of a company or corporation. Why would someone want to buy a share of stock? In theory, you want to own a company’s share of stock so that you can get paid a share of the company’s profits. This money is called DIVIDENDS. Therefore, if a stock’s owner is expected to get paid a lot of dividends now and in the future, then the stock should have a high value. http://www.youtube.com/watch?v=ccpJSkkPvdg On the other hand, if a stock’s owner is expected to get paid only little dividends now and in the future, the stock should have a low value. In theory, a stock’s value should go up if it will have more dividends in the future, and this should increase a stock’s price.In reality however, a stock’s theoretical value is often different from a stock’s price.
Views: 53233 MBAbullshitDotCom
Session 33: Market Timing Approaches - Valuing the Market
In this session, we look at extending valuation approaches developed for valuing individual stocks to valuing the entire market. We begin by using an intrinsic valuation model to value the S&P 500 as the present value of expected cash flows on the index. While the approach is promising, it is dependent upon historical data and can provide poor signals, if there has been a systematic shift in risk preferences or growth potential. We also look at valuing a market on a relative basis, by either comparing it’s pricing over time or by comparing pricing across markets
Views: 1776 Aswath Damodaran