Abstract
One thing that has struck me over the 25 years I have spent teaching derivatives is the way in which new participants often obsess over the technical details of financial products. Perhaps this is as a result of their formal education background which places a premium on academic rigour? However, a casual glance at an equity research report or a walk around a dealing floor reveals a very different picture—traders and sales people will be more interested in a company’s story.
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Notes
- 1.
See for example Schofield and Bowler (2011).
- 2.
See Schofield and Bowler (2011) for a discussion of the use of OIS rates as a risk-free proxy.
- 3.
See ‘What the equity risk premium tells us today’ Financial Times Fund Management supplement, 7 November 2011.
- 4.
In general terms interest expense is tax deductible and so debt can be cheaper than equity. A full discussion of optimal capital structures is outside the scope of the text.
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Pinto, J.E., Henry, E., Robinson, T.R., & Stowe, J.D. (2010) Equity asset valuation Wiley
Schofield, N.C., & Bowler, T. (2011) Trading, the fixed income, inflation and credit markets: a relative value guide Wiley Finance Series
Vause (2005) Guide to analysing companies The Economist
Viebig, Poddig, & Varmaz. (2008) Equity valuation: models from leading investment banks Wiley Finance Series
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Schofield, N.C. (2017). Equity Valuation. In: Equity Derivatives. Palgrave Macmillan, London. https://doi.org/10.1057/978-0-230-39107-9_3
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DOI: https://doi.org/10.1057/978-0-230-39107-9_3
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