Blog Posts

In this article, we’re going to look at a way to price American call options using another package in R, known as “AmericanCallOpt.” (American options are differentiated from European options in that with the former you can exercise before expiry. With the latter, there is no early-exercise option.) With this package, we can do the […]

Even some of the most basic questions about the markets are important as it pertains to understanding them, to get to kinow the mechanics involved in buying and selling stocks. When you fund a brokerage account and execute a trade, you tie up a certain amount of your money as collateral. As such, where does […]

The dividend discount model (DDM) is a method of valuing a company’s stock based on discounting the sum of all future dividends in terms of present value. In this case, we will be using a two-stage dividend discount model. Two-stage models tend to be the most common when evaluating firms. They entail valuing the amount […]

As an academic exercise, estimating or predicting the value of something or determining relationships between two or more variables is commonly done through linear regression methods. It is one of the most common statistical methods that individuals use to analyze data on a vast assortment of data. Can this be accurately be done with respect […]

An accretion/dilution analysis helps to determine the cost-effectiveness of a potential merger and acquisition (often termed M&A) deal. Mergers and acquisitions are made with the intention of improving the financial performance of each firm relative to what they could accomplish independently. This can be achieved by firms’ ability to reduce costs, combine talent and/or technology, […]

Using the Black-Scholes options pricing model, we can determine: the level of equity in a firm its value of outstanding debt the appropriate interest rate on the debt it has, and its risk neutral probability of default (i.e., bankruptcy) This model would be most applicable to distressed, highly leveraged firms. A distressed firm is one […]

Most traders and investors, especially those in developed markets, have grown accustomed to the fact that markets are liquid and they reliably open and close at predefined hours during certain days of the week. However, capital markets can also dry up or even disappear altogether. We also tend to be used to the idea that […]

Those in accounting, business, and finance will become familiar with the three types of financial accounting statements: income statement balance sheet, and cash flow statement All three serve as financial analysis reports to shed insight into how efficiently and effectively a business is operating. Let’s take a look at the nuts and bolts of all […]

A leveraged buyout (LBO) is a transaction where a financial sponsor purchases a company or specific asset with equity and substantial amounts of borrowed capital. The target company being acquired has its assets and cash flows used as leverage in the buyout to obtain and finance the deal. The LBO is a common transaction form […]

In other articles, we’ve argued that bitcoin and cryptocurrency can have a place in a balanced portfolio. In other words, some is okay, but too much can venture into speculation. (How Much of a Portfolio Should Be in Cryptocurrency?) The main limitation is its high volatility and high correlation to other kinds of assets (riskier […]