CONTENTS
Part I Strategy, Value and Risk
1. Strategy
1.1 Strategy and value
1.2 The external environment
1.2.1 Technology and innovation
1.2.2 Industry dynamics
1.2.3 Industry and globalization
1.2.4 Industry and climate change
1.3 Transformation and the firm
1.3.1 Innovation and the firm
1.3.2 Industry boundaries
1.3.3 Strategy and the environment
1.3.4 Future Value
Appendix 1 - Classifying industry sectors today
References
2. Value
2.1 Overview
2.2 The accounting foundations
2.2.1 Stocks and flows
2.2.2 Ratio analysis
2.2.3 Residual earnings and free cash flow
2.2.4 Intangible assets and intellectual property
2.2.5 Pro forma analysis
2.3 Corporate Investments
2.3.1 Investment methods
2.3.2 DCF valuation
2.3.3 The Net Present Value Rule
2.3.4 Real Options
2.3.5 Valuing Real Options
2.3.6 Types of Real Options
2.4 Corporate finance
2.4.1 Overview
2.4.2 Theories of firm value
2.4.3 Developments in the theories of firm value
2.5 Optimizing the firm structure
Appendix 2 Modularity
References
3. Risk
3.1 Investment risk
3.2 Corporate risk management
3.3 The risk drivers
3.4 Value and risk
References
Part II Quantitative Analytics
4. Financial statistics
4.1 Time series analysis
4.2 Regression models
4.3 Volatility
4.4 The lognormal distribution
4.5 Volatility and the firm
References
5. Derivatives
5.1 Futures, forwards and options
5.2 The replicating portfolio and risk-neutral valuation
5.3 A model for asset prices
5.4 The Black-Scholes formula
5.5 Numerical techniques
5.5.1 Monte Carlo Simulation
5.5.2 The binomial and trinomial method
References
6. Derivative model applications
6.1 Spot price models
6.1.1 Geometric Brownian motion
6.1.2 Mean reversion
6.1.3 Jumps and seasonal patterns
6.2 Stochastic volatility
6.3 Forward Curve Models
6.3.1 A single factor model for the forward curve
6.3.2 The dynamics of the forward curve
6.3.3 The relationships between forward curve and spot price models
6.4 Convertible bonds
6.5 Compound options
6.6 Model risk
References
Part III The analysis of transformation and value
Overview
7. Platforms, data and analytics
7.1 Platforms
7.2 Cloud computing
7.3 Artificial intelligence
7.4 Quantum computing
7.5 Data
7.6 Analytical management
7.7 IT investments
7.8 Patent options
References
8. Energy
8.1 The global energy markets
8.2 Transformation of the energy sector
8.3 Natural gas and renewables
8.4 Energy Statistics
8.4.1 The Schwartz single factor model
8.4.2 Schwartz single factor futures and forward pricing
8.4.3 Volatility
8.4.4 Correlations
8.4.5 Simulating mean reversion
8.4.6 Estimating the mean reversion rates
8.4.7 The jump parameters
8.4.8 The half-life of a mean reverting process
8.4.9 Energy spot price model simulation
8.4.10 Wind power statistics
8.5 Natural gas generation valuation
8.5.1 Overview
8.5.2 Energy forward curves
8.5.3 Energy derivatives
8.5.4 Energy spread options
8.5.5 Natural gas peaking power plant valuation
8.5.6 Energy analysis and valuation
References
9. Pharmaceuticals and Biotechnology
9.1 Overview
9.2 New drug development
9.3 Valuation
9.3.1 The revenues
9.3.2 The research and development costs
9.3.3 The cost of capital
9.3.4 NPV valuation
9.3.5 The Expected NPV Valuation
9.4 The real options method
References
10. A Growth Firm
10.1 Overview
10.2 The valuation of growth
10.3 A growth case study
10.4 Growth options
10.5 A growth option case study
References
11. Firm transformation and divesture
11.1 Industry decline
11.2 Strategies in declining industries
11.3 Industry decline and transformation
11.4 Investor valuation of the abandonment option
11.5 An abandonment option case study
References
