Index 367. F Fashion drugs 102 FDA 69, 70 Feed rate 234, 262 most likely 328 Financial option valuation 59 Financial options 38 Fund raising 5

Size: px
Start display at page:

Download "Index 367. F Fashion drugs 102 FDA 69, 70 Feed rate 234, 262 most likely 328 Financial option valuation 59 Financial options 38 Fund raising 5"

Transcription

1 References AUTM (2005) AUTM U.S. Licensing Survey: FY (Survey summary of the AUTM U.S. Licensing Survey: FY 2004) Black, F. and Scholes, M. (1973) The Pricing of Options and Corporate Liabilities Journal of Political Economy, 81, Burrill&Company (2005) BioCentury Report 2005 CDER (2004) Measures of Pharma Industry s New Drug Output, Ernst&Young (2006) Beyond Borders: Global Biotechnology Report 2006 Kaushik, A. (1991) On the computation of continuous time option prices using discrete approximations, Journal of financial and quantitative analysis, (26)4 Kaushik, A. (1995) Option pricing trees, The Journal of Derivatives, 2(4) Kola, I. and J. Landis (2004) Can the pharmaceutical industry reduce attrition rates? Nat Rev Drug Discov 3(8): Lehman Brothers (2003) Assessing Patent Risk and Company-specific Exposure to Generics, e Ma, P. and R. Zemmel (2002) Value of novelty? Nat Rev Drug Discov. 1(8): Markowitz, H. M. (1952) Portfolio Selection Journal of Finance 7, McNulty, J. and Yeh, T., Schulze, W. and Lubatkin, M. (2002) What s your real cost of capital? Harvard Business Review, October 2002, Sharpe, P. and Keelin, T. (1998) How SmithKline-Beecham makes good resource allocation decisions Harvard Business Review, March/April 1998, Villiger, R. and Bogdan, B. (2005) Getting real about valuations in biotech Nature Biotechnology, April 2005, Villiger R. and Bogdan, B. (2005) Valuing Pharma R&D The Catch-22 of DCF Journal of Applied Corporate Finance, Spring 2005 B. Bogdan, R. Villiger, Valuation in Life Sciences, 3rd ed., DOI / , Springer-Verlag Berlin Heidelberg 2010

2 364 References Villiger, R. and Bogdan, B. (2005) What s biotech really worth? Scrip Magazine, June 2005, Villiger, R. and Bogdan, B. (2006) Pitfalls of Valuation Journal of Commercial Biotechnology, April 2006,

3 Index 510(k) 71 A Actelion 98, 279 Analysis of simulations 140 Anti-dilution clauses 272 Anti-stacking 149 Approval Phase 70 Arbitrage 60 Asset allocation 246 Astra Zeneca 98 AUTM 2 Avastin 280 Average drug Development Costs 74 Average duration of drug development 76 B Balance sheet 258 Basics of valuation Cash flows 11 Discounted cash flow valuation 29 Discounting 13 Real options 36 Valuation methods 29 Berna Biotech 98 Beta 18, 20 Bextra 243 Binomial tree 125, 163 Peak sales 47 Solving the end nodes 53 Spanning the tree 49 Working back the tree 55 Working back the tree to the root 57 Binomial Tree Probability distribution 53 Biologics New approvals 3 Biotech 3 Biotech companies Sublicensing 169 Black, Fisher 59 Black-Scholes formula 7, 59 Black-Scholes Formula 64 Brownian motion 62 C Calculation of end nodes 47 Calculation of generic conracts 179 Call-back option 149 Cancer drugs Multiple indications 218 Capital asset pricing model 18 CAPM 8, 19, 269 Case Study Sublicensing 203 Cash 262 Cash flow size 12 Cash flow statement 12 Cash flows Discounting 112 Probability 111 Uncertainty 21 Cash flows from financing activities 11 Cash flows from investing activities 11

4 366 Index Cash flows from operations 11 Cash flows probability 129 Cash flows size 128 Cash flows timing 129 CE-mark 70 Change in liquidity 12 Clinical phase 1 trials 69 Clinical phase 2 trials 69 Clinical phase 3 trials 70 Co-development 149 Co-marketing 150 Company valuation 255 Accounting value 258 Asset based 258 Building blocks 260 Cash balance 273 Cash flow based 260 cash flows 260 Discount rate 269 Feed rate 265 Financial statements 263 Income based 260 Market based 260 Methods 258 Risk profile 273 Simulations 275 Value 273 Value development 273 Company Valuation Case study 275 Cash 262 Debt 263 Fixed assets 262 Fundraising 255 IPO 256 Licencing 256 M&A 256 Projects 261 Taxes 263 Technology 261 Unallocated costs 263 Company value development Change in discount rate 274 Clinical trial results 273 Comparison of DCF and real options 41 Comparison of participation rates 192 Comparison of real options resolution methods 44 Convertible bond 271 Convertible debt 271 Co-promotion 150 Copyrights 236 Cost 72 Cost of capital 15 COX-2 inhibitors 243 Cumulative Milestone 308, 319 Cumulative Sales 308, 319 D DCF 7, 11, 29, 30, 105, 109 Managment flexibility 37 Sensitivity analysis 130 DCF vs. ROV 129 Debt 270 Payoff profile 270 Decision Tree 32 Development costs 7 Dicounting 129 Dilution 256, 269, 272, 290 DiMasi 72 Discount rate 7, 132, 269 Discounted cash flow valuation 29 Discounting 96 Continuous compounding 14 Discrete compounding 14 Expected return 14 MCPM 97 Risk 14 Theory and Reality 96 Time value 13 Disease category average sales 78 Disease category median sales 78 Diversification 23 Drug development costs Approval 74

5 Index 367 Clinical phase 1 73 Clinical phase 2 73 Clinical phase 3 73 Lead optimisation 73 Preclinical 73 Drug Development Duration 76 Drug development success rates 75 E Efficient frontier 246 EMEA 69 Employee stock option 272 Equity 148 Estimation of peak sales 77 Excel Goal Seek 313 IRR 313 Expected Utility Theory 99 F Fashion drugs 102 FDA 69, 70 Feed rate 234, 262 most likely 328 Financial option valuation 59 Financial options 38 Fund raising 5 G Game theory 249 Genentech 98, 280 Generic contract calculation 179 Generic contracts 181 Global biotech financing 3 Growth rate 47, 131 H Hamilton-Jacobi-Bellmann equation 64 Hedging 59 Hit identification 68 Hurdle rate 31 I Income statement 263 IND 69 Inflation 16 Internal rate of return 31, 307 Investors 256 IP 2 IP valuation Accounting 236 Fundraising 236 Licensing 236 Litigation 236 M&A 236 IP valuation techniques 238 Cost based 238 Income based 238 Market based 238 IRR 135, 307 K Kaushik 229 L Lead optimisation 68 Leverage 269, 271 License contract valuation 146 DCF 159 Licensee 159 Licensor 158 Manual for real options 162 Real options 160 Spanning the tree 163 Value share licensee-licensor 160 Working back the tree 163 License contracts Case study real options 163 Case study two parties 155 Cash flows 153 DCF valuation 152 Discount rate 154 Valuation with DCF 155

6 368 Index License fees 148 License Negotiation 214 Licensing 5, 7 Biotech 151 Pharma 151 Universities 151 Value share 152 Life saving drugs 102 M M&A 5, 7, 290 Margin 111 Market asset disclaimer 64 Market capitalisation 278 Market portfolio 18 Market risk premium 18 Market-derived capital asset pricing model 20 Markowitz 18, 246 MCPM 8, 20, 97, 269 Medical device development (k) 71 Class I device 71 Class II device 71 Class III device 71 Premarket approval 71 Medimmune 98 Merck 98, 243 Milestones 147 Multi-dimensional trees 224 Multiple indications 218 Correlation of indications 230 DCF 219 Real options 223 Success rates 230 Multiple markets 232 N Nash, John 249 Negotiation Sublicensing 176 Negotiation deadlock 171 Net present value 30 Novartis 243 NPV 30 O Operating expenses 111 Out-licensing Sublicensing 201 P Partial differential equation 44 Patent valuation 236 Patents 236 Peak sales 7, 131 Indication 223 Peak Sales 77, 80 Bottom-up calculation 80 Peak sales estimate 48 Pfizer 243 Pharma 4 Pharma R&D 4 Phase 1V trials 70 Pipeline Correlation 243 Pipeline simulation 243 Pipeline valuation 243 PMA 72 Portfolio management 5, 245, 246 Qualitative approach 247 Quantitative approaches 248 Post-development volatility 102 Post-money valuation 257 Preclinical Testing 68 Pre-commercialisation 102 Prexige 243 Probability of cash flows 13 Project valuation 103, 107 Analysts 103 Business developers 103 Case study DCF 107 Case study real options 123 Cash flows 105 DCF 105 Discount rate 106

7 Index 369 Investors 103 Portfolio managers 103 Project managers 103 Real option manual 121 Real options 121 R R&D funding 147 Ratchets 272 Reach-through royalties 148 Real option valuation 11 Theory 36 Real options 7 Balck-Scholes formula 59 Binomial tree 45 Binomial tree formulae 49 Binominal tree 124 Compound options 38 Difference to financial options 59 Finite differences 41 Formula 41 Management flexibility 37 Market conditions 37 Option to abandon 38 Option to expand 38 Option to grow 38 Option to switch 38 Options to defer 38 Project valuation 121 Resolution methods 41 Sensitivity analysis 130 Simulations 41 Strategic management tool 40 Trees 41 Valuation of end nodes 126 Volatility 100 Working back the tree 126 Redemption 147 Replicationg portfolio 59 Research institutions Licensing 169 Resource allocation 249 Right of first look 149 Risk adjusted net present value 30 Risk Aversion 24 Risk free interest rate 13 Risk profile 135 Risk-neutral probability 62 rnpv 30 Royalties 147 S Sales curve 129 Schering 98 Scholes, Myron 59 Sensitivity analysis Discount rate 131 Growth rate 131 Margin 131 Peak sales 131 Success rates 131 Sharpe 246 Sharpe ratio 18 Simulation Clinical success 136 Portfolio 135 Simulation of license contracts 194 Simulation of scenarios 138 Simulations 134, 275 Company value 135 Excel 136 Peak sales 136 Real options 141 Thresholds 141 Simulations in Excel 134 Stacked royalties 148, 194 Stackelberg game 249 Standard sales curve 109 Stock valuation 278 Scenario analysis 282 Stock Valuation 255 Structure of license contracts 146 Sublicensing 149, 169, 201 Calculation of participation rates 176

8 370 Index Case study 203 DCF theory 173 Negotiation 176 Participation rate 175 Real option valuation manual 185 Sublicensing parameters 170 Success rate 7 Success rates 74, 132, 219 Discount 326 T Take-over 310 Target identification 67 Target validation 68 Taxes 266 Technology transfer 5, 207 Sublicensing 207 Technology transfer managers 173 Technology valuation 233 Terminal value 265 Terminal Value 17 The role of valuation 5 Time of cash flows 13 Time steps half-yearly 306 Trademarks 236 Tree for multiple indications 224 U Uncertainty 21 Market Uncertainty 21 Technical Uncertainty 21 Underlying of the binomial tree 47 Universities 2 Upfront payment 147 US Licensing Universities 2 V Valuation Current problems 6 Input parameters 7 Interpretation of results 8 Methods and methodology 7 Valuation basics 11 Valuation in Life Sciences 67 Valuation of financial options 60 Value at risk 135 Value Development Discount Rate 273 Success Rate 273 Value Jump 23 Value sharing 152 Veletri 279 Vioxx 243 Virtual company 201 Volatility 47, 100, 124 Competition 102 General state of the economy 102 Regulation 102 W WACC 15, 16, 261, 269 Worst case scenario 135

Fashion drugs 70 FDA 10, 18 Feed rate 173, 194 most likely 238 Financial option valuation 57 Financial options 36 Fund raising 5

Fashion drugs 70 FDA 10, 18 Feed rate 173, 194 most likely 238 Financial option valuation 57 Financial options 36 Fund raising 5 References AUTM (2005) AUTM U.S. Licensing Survey: FY 2004. (Survey summary of the AUTM U.S. Licensing Survey: FY 2004) Black, F. and Scholes, M. (1973). The Pricing of Options and Corporate Liabilities

More information

Papers. Pitfalls of valuation in biotech

Papers. Pitfalls of valuation in biotech Ralph Villiger and Boris Bogdan are partners at Avance, Basel GmbH, a company focusing on consulting and software development within the pharmaceutical and biotechnology industry. Papers Pitfalls of valuation

More information

Valuing Biotechnology Companies. Neil J. Beaton, CPA/ABV/CFF, CFA, ASA Alvarez & Marsal Valuation Services, LLC October 9, 2017

Valuing Biotechnology Companies. Neil J. Beaton, CPA/ABV/CFF, CFA, ASA Alvarez & Marsal Valuation Services, LLC October 9, 2017 Valuing Biotechnology Companies Neil J. Beaton, CPA/ABV/CFF, CFA, ASA Alvarez & Marsal Valuation Services, LLC October 9, 2017 Agenda: Foundations Valuation Techniques Unique Aspects to Consider Foundations

More information

INTRODUCTION TO THE ECONOMICS AND MATHEMATICS OF FINANCIAL MARKETS. Jakša Cvitanić and Fernando Zapatero

INTRODUCTION TO THE ECONOMICS AND MATHEMATICS OF FINANCIAL MARKETS. Jakša Cvitanić and Fernando Zapatero INTRODUCTION TO THE ECONOMICS AND MATHEMATICS OF FINANCIAL MARKETS Jakša Cvitanić and Fernando Zapatero INTRODUCTION TO THE ECONOMICS AND MATHEMATICS OF FINANCIAL MARKETS Table of Contents PREFACE...1

More information

Both NPV and rnpv use

Both NPV and rnpv use Prepared August 2018 Valuing Pharmaceutical Assets: When to Use NPV vs rnpv Accurately assessing the present value of pharmaceutical products during the various stages of research and development poses

More information

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model

Revenue from contracts with customers The standard is final A comprehensive look at the new revenue model What s inside: Overview... 1 Scope...2 Licences and rights to use...2 Variable consideration and the constraint on revenue recognition...5 Sales to distributors and consignment stock...10 Collaborations

More information

How to value your start-up Dr. Patrik Frei January 2016 San Francisco

How to value your start-up Dr. Patrik Frei January 2016 San Francisco How to value your start-up Dr. Patrik Frei January 2016 San Francisco Overview Introduction to Valuation Valuation of start-up companies Valuation of a therapeutic Product Q & A 2 Venture Valuation Mission

More information

SWK Holdings. May 2012

SWK Holdings. May 2012 SWK Holdings May 2012 Forward-looking and Cautionary Statements Statements in this presentation that are not strictly historical, and any statements regarding events or developments that we believe or

More information

Valuation. Advanced Starter Seminars. Brussels, 23 November Thomas Crispeels

Valuation. Advanced Starter Seminars. Brussels, 23 November Thomas Crispeels Valuation Advanced Starter Seminars Brussels, 23 November 2017 Thomas Crispeels Funding a High-Technology Company Start-up Case Study Source Start-up case study Lecture by Rudy Dekeyser VIB Tech Transfer

More information

Valuation in Life Sciences

Valuation in Life Sciences Valuation in Life Sciences A Practical Guide Bearbeitet von Boris Bogdan, Ralph Villiger 3rd ed. 2010. Buch. xiv, 370 S. Hardcover ISBN 978 3 642 10819 8 Format (B x L): 15,5 x 23,5 cm Gewicht: 1580 g

More information

CBI - 10th Life Sciences Accounting and Reporting Congress. March 18, 2014

CBI - 10th Life Sciences Accounting and Reporting Congress. March 18, 2014 CBI 0th Life Sciences Accounting and Reporting Congress March 8, 204 Introductions Brent Sabatini Director Technical Accounting & Controls Prateep Menon, CFA Principal Life Sciences Advisory Services One

More information

From Discrete Time to Continuous Time Modeling

From Discrete Time to Continuous Time Modeling From Discrete Time to Continuous Time Modeling Prof. S. Jaimungal, Department of Statistics, University of Toronto 2004 Arrow-Debreu Securities 2004 Prof. S. Jaimungal 2 Consider a simple one-period economy

More information

The Royalty Rate Report A Comprehensive Assessment of Valuation in the Pharmaceutical Sector

The Royalty Rate Report A Comprehensive Assessment of Valuation in the Pharmaceutical Sector A Comprehensive Assessment of Valuation in the Pharmaceutical Sector Table of Contents Introduction Three Lessons on Royalties Too Often Learned the Hard Way Royalties, What s the Big Deal? Overview of

More information

Investigation of optimal valuation methods in the pharmaceutical industry

Investigation of optimal valuation methods in the pharmaceutical industry Master thesis in Finance and International Business Investigation of optimal valuation methods in the pharmaceutical industry Authors: Morten Vester & Andreas Holmgaard Petersen Characters: 185.598 Supervisor:

More information

What you need to know to succeed in doing deals and fundraising Dr. Patrik Frei May 2014 Seoul BioKorea

What you need to know to succeed in doing deals and fundraising Dr. Patrik Frei May 2014 Seoul BioKorea What you need to know to succeed in doing deals and fundraising Dr. Patrik Frei May 2014 Seoul BioKorea Overview Introduction to Valuation Valuation of a companies Valuation of a therapeutic Product Q

More information

Advanced Company Analysis Valuation & Financial Modelling. 5-9 March 2017 Manama, Bahrain. euromoneylearningsolutions.

Advanced Company Analysis Valuation & Financial Modelling. 5-9 March 2017 Manama, Bahrain. euromoneylearningsolutions. Advanced Company Analysis Valuation & Financial Modelling 5-9 March 2017 Manama, Bahrain euromoneylearningsolutions.com/learnmore Advanced Company Analysis Valuation & Financial Modelling Accelerate your

More information

Dynamic Strategic Planning. Evaluation of Real Options

Dynamic Strategic Planning. Evaluation of Real Options Evaluation of Real Options Evaluation of Real Options Slide 1 of 40 Previously Established The concept of options Rights, not obligations A Way to Represent Flexibility Both Financial and REAL Issues in

More information

Establishing a Clinical Trials Finance Facility

Establishing a Clinical Trials Finance Facility Establishing a Clinical Trials Finance Facility Finance and licensing proposal October 2008 Overview Market Assessment Traditional equity funding model for pharmaceutical R&D under systemic pressure because

More information

Workshop Presentation: Deal and Product Valuations Nov 2017 NYC, RESI Agenda 1.Overview of product valuation 2.rNPV product valuation 3.Deal structure / Negotiation 4.Case Study 2 Company Mission Independent

More information

Measuring the return from pharmaceutical innovation 2017 Methodology

Measuring the return from pharmaceutical innovation 2017 Methodology Measuring the return from pharmaceutical innovation 2017 Methodology Contents Introduction 01 Methodology 02 Original cohort 03 Extension cohort 03 Assets evaluated 03 Methodology amendments and restatements

More information

Real Options. Katharina Lewellen Finance Theory II April 28, 2003

Real Options. Katharina Lewellen Finance Theory II April 28, 2003 Real Options Katharina Lewellen Finance Theory II April 28, 2003 Real options Managers have many options to adapt and revise decisions in response to unexpected developments. Such flexibility is clearly

More information

Web Extension: Abandonment Options and Risk-Neutral Valuation

Web Extension: Abandonment Options and Risk-Neutral Valuation 19878_14W_p001-016.qxd 3/13/06 3:01 PM Page 1 C H A P T E R 14 Web Extension: Abandonment Options and Risk-Neutral Valuation This extension illustrates the valuation of abandonment options. It also explains

More information

VALUING YOUR OPPORTUNITY How industry and investors evaluate your project or company

VALUING YOUR OPPORTUNITY How industry and investors evaluate your project or company VALUING YOUR OPPORTUNITY How industry and investors evaluate your project or company Dr. Patrik Frei September 2015 Brisbane Overview Introduction Valuation of start-up companies Valuation of a therapeutic

More information

IP Valuation Committee June Advancing the Business of Intellectual Property Globally 2018 LES International - IP Valuation Committee 1

IP Valuation Committee June Advancing the Business of Intellectual Property Globally 2018 LES International - IP Valuation Committee 1 IP Valuation Committee June 2018 Advancing the Business of Intellectual Property Globally 2018 LES International - IP Valuation Committee 1 Why do we focus on intangible (IP) assets? Intangible value of

More information

Drug Royalty II $701,420,000. Presentation to: San Diego County Employees Retirement Association

Drug Royalty II $701,420,000. Presentation to: San Diego County Employees Retirement Association Drug Royalty II $701,420,000 Presentation to: San Diego County Employees Retirement Association November 2010 Profile Business Model Team Investment Criteria To acquire Royalty Streams on established commercialized

More information

Technical Line FASB final guidance

Technical Line FASB final guidance No. 2017-22 Updated 4 December 2017 Technical Line FASB final guidance How the new revenue standard affects life sciences entities In this issue: Overview... 1 Collaborative arrangements... 2 Effect of

More information

Market Risk Analysis Volume I

Market Risk Analysis Volume I Market Risk Analysis Volume I Quantitative Methods in Finance Carol Alexander John Wiley & Sons, Ltd List of Figures List of Tables List of Examples Foreword Preface to Volume I xiii xvi xvii xix xxiii

More information

How Financial Engineering

How Financial Engineering How Financial Engineering Can Cure Cancer Andrew W. Lo, MIT (based on joint work with David Fagnan, Jose Maria Fernandez, Austin Gromatzky, and Roger Stein) 2014 Meeting, The Nti National lacademies MIT

More information

CFE: Level 1 Exam Sample Questions

CFE: Level 1 Exam Sample Questions CFE: Level 1 Exam Sample Questions he following are the sample questions that are illustrative of the questions that may be asked in a CFE Level 1 examination. hese questions are only for illustration.

More information

Valuation Case Study: Jazz Pharmaceuticals [JAZZ] How to Make an Investment Decision

Valuation Case Study: Jazz Pharmaceuticals [JAZZ] How to Make an Investment Decision Valuation Case Study: Jazz Pharmaceuticals [JAZZ] How to Make an Investment Decision Step 1 Reviewing the Numbers For a case study like this, always start with the numbers. You will not have enough time

More information

R&D of Biotech Start ups in Global Financial Uncertainty

R&D of Biotech Start ups in Global Financial Uncertainty R&D of Biotech Start ups in Global Financial Uncertainty Takao Fujiwara Toyohashi University of Technology, Aichi 441-8580, Japan Abstract--As the research background, there is a high possibility of difficulty

More information

Intra-Group Services & Intangibles

Intra-Group Services & Intangibles Intra-Group Services & Intangibles Mbiki Kamanjiri @ 2016 Grant Thornton All rights reserved. What is covered under Intangible Property Definition: Property with no physical existence but whose value depends

More information

Financing sources for life science projects and companies Dr. Aitana Peire May 2017 International Exploitation Training FFH2.

Financing sources for life science projects and companies Dr. Aitana Peire May 2017 International Exploitation Training FFH2. Financing sources for life science projects and companies Dr. Aitana Peire May 2017 International Exploitation Training FFH2.0, Prague Venture Valuation Mission Independent assessment and valuation of

More information

Licensing deal versus VC financing: A valuation approach Dr. Patrik Frei January 2010 Flims

Licensing deal versus VC financing: A valuation approach Dr. Patrik Frei January 2010 Flims Licensing deal versus VC financing: A valuation approach Dr. Patrik Frei January 2010 Flims 1 Overview 1. Introduction 2. Valuation of Products 3. Deal vs. Financing 4. Conclusion 2 Venture Valuation 1.

More information

Imugene to Raise A$20.1 million

Imugene to Raise A$20.1 million Not for release to US wire services or distribution in the United States ASX Announcement Imugene to Raise A$20.1 million License of US based B-cell cancer vaccine platform creating a dominant position

More information

Fuzzy sets and real options approaches for innovation-based investment projects effectiveness evaluation

Fuzzy sets and real options approaches for innovation-based investment projects effectiveness evaluation Fuzzy sets and real options approaches for innovation-based investment projects effectiveness evaluation Olga A. Kalchenko 1,* 1 Peter the Great St.Petersburg Polytechnic University, Institute of Industrial

More information

Life Sciences Spotlight Effectively Treating the Impacts of the Converged Revenue Recognition Model

Life Sciences Spotlight Effectively Treating the Impacts of the Converged Revenue Recognition Model Issue 4, March 2012 Life Sciences Spotlight Effectively Treating the Impacts of the Converged Revenue Recognition Model In This Issue: Background Key Accounting Issues Challenges for Life Sciences Entities

More information

Notes. Cases on Static Optimization. Chapter 6 Algorithms Comparison: The Swing Case

Notes. Cases on Static Optimization. Chapter 6 Algorithms Comparison: The Swing Case Notes Chapter 2 Optimization Methods 1. Stationary points are those points where the partial derivatives of are zero. Chapter 3 Cases on Static Optimization 1. For the interested reader, we used a multivariate

More information

Binomial Trees. Liuren Wu. Options Markets. Zicklin School of Business, Baruch College. Liuren Wu (Baruch ) Binomial Trees Options Markets 1 / 22

Binomial Trees. Liuren Wu. Options Markets. Zicklin School of Business, Baruch College. Liuren Wu (Baruch ) Binomial Trees Options Markets 1 / 22 Binomial Trees Liuren Wu Zicklin School of Business, Baruch College Options Markets Liuren Wu (Baruch ) Binomial Trees Options Markets 1 / 22 A simple binomial model Observation: The current stock price

More information

Corporate Finance, Module 21: Option Valuation. Practice Problems. (The attached PDF file has better formatting.) Updated: July 7, 2005

Corporate Finance, Module 21: Option Valuation. Practice Problems. (The attached PDF file has better formatting.) Updated: July 7, 2005 Corporate Finance, Module 21: Option Valuation Practice Problems (The attached PDF file has better formatting.) Updated: July 7, 2005 {This posting has more information than is needed for the corporate

More information

Handbook of Financial Risk Management

Handbook of Financial Risk Management Handbook of Financial Risk Management Simulations and Case Studies N.H. Chan H.Y. Wong The Chinese University of Hong Kong WILEY Contents Preface xi 1 An Introduction to Excel VBA 1 1.1 How to Start Excel

More information

Computational Finance. Computational Finance p. 1

Computational Finance. Computational Finance p. 1 Computational Finance Computational Finance p. 1 Outline Binomial model: option pricing and optimal investment Monte Carlo techniques for pricing of options pricing of non-standard options improving accuracy

More information

Risk-Neutral Valuation

Risk-Neutral Valuation N.H. Bingham and Rüdiger Kiesel Risk-Neutral Valuation Pricing and Hedging of Financial Derivatives W) Springer Contents 1. Derivative Background 1 1.1 Financial Markets and Instruments 2 1.1.1 Derivative

More information

Corporate Finance (Honors) Finance 100 Sections 301 and 302 The Wharton School, University of Pennsylvania Fall 2010

Corporate Finance (Honors) Finance 100 Sections 301 and 302 The Wharton School, University of Pennsylvania Fall 2010 Corporate Finance (Honors) Finance 100 Sections 301 and 302 The Wharton School, University of Pennsylvania Fall 2010 Course Description The purpose of this course is to introduce techniques of financial

More information

Subject CT8 Financial Economics Core Technical Syllabus

Subject CT8 Financial Economics Core Technical Syllabus Subject CT8 Financial Economics Core Technical Syllabus for the 2018 exams 1 June 2017 Aim The aim of the Financial Economics subject is to develop the necessary skills to construct asset liability models

More information

The Merton Model. A Structural Approach to Default Prediction. Agenda. Idea. Merton Model. The iterative approach. Example: Enron

The Merton Model. A Structural Approach to Default Prediction. Agenda. Idea. Merton Model. The iterative approach. Example: Enron The Merton Model A Structural Approach to Default Prediction Agenda Idea Merton Model The iterative approach Example: Enron A solution using equity values and equity volatility Example: Enron 2 1 Idea

More information

PROGRAM. Program: Economics

PROGRAM. Program: Economics Program: Economics A. FINANCIAL ECONOMICS 1. Financial Markets and Instruments Definition of financial market and its role. Structure and main participants of financial market. Types of financial market.

More information

Masterclass on Portfolio Construction and Optimisation

Masterclass on Portfolio Construction and Optimisation Masterclass on Portfolio Construction and Optimisation 5 Day programme Programme Objectives This Masterclass on Portfolio Construction and Optimisation will equip participants with the skillset required

More information

Valuing Early Stage Investments with Market Related Timing Risk

Valuing Early Stage Investments with Market Related Timing Risk Valuing Early Stage Investments with Market Related Timing Risk Matt Davison and Yuri Lawryshyn February 12, 216 Abstract In this work, we build on a previous real options approach that utilizes managerial

More information

Institute of Actuaries of India. Subject. ST6 Finance and Investment B. For 2018 Examinationspecialist Technical B. Syllabus

Institute of Actuaries of India. Subject. ST6 Finance and Investment B. For 2018 Examinationspecialist Technical B. Syllabus Institute of Actuaries of India Subject ST6 Finance and Investment B For 2018 Examinationspecialist Technical B Syllabus Aim The aim of the second finance and investment technical subject is to instil

More information

Real Options Based Analysis of Optimal Pharmaceutical Research and Development Portfolios

Real Options Based Analysis of Optimal Pharmaceutical Research and Development Portfolios Ind. Eng. Chem. Res. 2002, 41, 6607-6620 6607 GENERAL RESEARCH Real Options Based Analysis of Optimal Pharmaceutical Research and Development Portfolios Michael J. Rogers, Anshuman Gupta, and Costas D.

More information

Billingsley_Index.qxd 9/6/05 1:34 PM Page 193 INDEX INDEX

Billingsley_Index.qxd 9/6/05 1:34 PM Page 193 INDEX INDEX Billingsley_Index.qxd 9/6/05 1:34 PM Page 193 A absence of arbitrage, 4 absolute convergence process, 15 absolute PPP, 76-78 absolute prices, 30 all-equity capital structure, 173 analogies, M&M model,

More information

İSTANBUL BİLGİ UNIVERSITY, DEPT. OF INDUSTRIAL ENGINEERING. IE 481 Financial Engineering, Fall credits / 6 ECTS Credits

İSTANBUL BİLGİ UNIVERSITY, DEPT. OF INDUSTRIAL ENGINEERING. IE 481 Financial Engineering, Fall credits / 6 ECTS Credits Instructor Information: IE 481 Financial Engineering, Fall 2017 3 credits / 6 ECTS Credits Instructor: Akın Rota Office Location: - E-mail: akin.rota@jpatr.com Office Phone: 0-533-2969890 Office Hours:

More information

Binomial Trees. Liuren Wu. Zicklin School of Business, Baruch College. Options Markets

Binomial Trees. Liuren Wu. Zicklin School of Business, Baruch College. Options Markets Binomial Trees Liuren Wu Zicklin School of Business, Baruch College Options Markets Binomial tree represents a simple and yet universal method to price options. I am still searching for a numerically efficient,

More information

Valuation of Life Sciences Companies

Valuation of Life Sciences Companies Valuation of Life Sciences Companies Patrik Frei Sep 2017 BIO IP & Diagnostics Symposium (IPDx) Agenda 1.Overview of valuation 2.rNPV product valuation 3.Deal structuring 2 Company Mission Independent

More information

Corporate Finance.

Corporate Finance. Finance 100 Spring 2008 Dana Kiku kiku@wharton.upenn.edu 2335 SH-DH Corporate Finance The objective of this course is to provide a rigorous introduction to the fundamental principles of asset valuation,

More information

Research and Development (R&D)

Research and Development (R&D) This article investigates the staging option to analyze an existing case study that involves the potential licensing of a drug compound that is in development. It demonstrates how options analysis is a

More information

FINANCE 611: CORPORATE FINANCE

FINANCE 611: CORPORATE FINANCE FINANCE 611: CORPORATE FINANCE FALL 2016 Prof. Michael R. Roberts Office: 2319 Steinberg Hall-Dietrich Hall Email: mrrobert@wharton.upenn.edu Office Phone: (215) 573-9780 Office hours: By Appointment Course

More information

Brandao et al. (2005) describe an approach for using traditional decision analysis tools to solve real-option valuation

Brandao et al. (2005) describe an approach for using traditional decision analysis tools to solve real-option valuation Decision Analysis Vol. 2, No. 2, June 2005, pp. 89 102 issn 1545-8490 eissn 1545-8504 05 0202 0089 informs doi 10.1287/deca.1050.0041 2005 INFORMS Alternative Approaches for Solving Real-Options Problems

More information

Profitable Growth : Why Acquisitions Matter at Least in Some Industries By: Dr. Thomas W. Schrepfer MBA, LL.M. PMIC Advisors Group Ltd.

Profitable Growth : Why Acquisitions Matter at Least in Some Industries By: Dr. Thomas W. Schrepfer MBA, LL.M. PMIC Advisors Group Ltd. Profitable Growth : Why Acquisitions Matter at Least in Some Industries By: Dr. Thomas W. Schrepfer MBA, LL.M. PMIC Advisors Group Ltd. Reference: SAMBA plus (Swiss Association of MBAs) SAM-Talk: Zurich,

More information

3 DAY COURSE/WORKSHOP STRATEGIC OPEN PIT MINE PROJECT EVALUATION

3 DAY COURSE/WORKSHOP STRATEGIC OPEN PIT MINE PROJECT EVALUATION 3 DAY COURSE/WORKSHOP STRATEGIC OPEN PIT MINE PROJECT EVALUATION MiningMath Associates and the Laboratory of Mineral Research and Mine Planning of UFMG have partnered with Rompev Pty Ltd to bring to you

More information

Bridging the Gap in Deal Valuation. Wednesday April 12, 2017

Bridging the Gap in Deal Valuation. Wednesday April 12, 2017 Bridging the Gap in Deal Valuation Wednesday April 12, 2017 Bridging the Gap in Deal Valuation Speakers: Clare Fisher, Vice President, Interim Head of Transactions, Shire Greg Miller, MBA, MPH, Vice President

More information

INSTITUTE OF ACTUARIES OF INDIA

INSTITUTE OF ACTUARIES OF INDIA INSTITUTE OF ACTUARIES OF INDIA EXAMINATIONS 10 th November 2008 Subject CT8 Financial Economics Time allowed: Three Hours (14.30 17.30 Hrs) Total Marks: 100 INSTRUCTIONS TO THE CANDIDATES 1) Please read

More information

International Financial Reporting Standards (IFRS) Issues and Solutions for the Pharmaceuticals and Life Sciences Industries - Vol III

International Financial Reporting Standards (IFRS) Issues and Solutions for the Pharmaceuticals and Life Sciences Industries - Vol III Pharmaceuticals and Life Sciences International Financial Reporting Standards (IFRS) Issues and Solutions for the Pharmaceuticals and Life Sciences Industries - Vol III Accounting For Licensing and Development

More information

Paper 4. Fund Investment Consultant Examination. Thailand Securities Institute November 2014

Paper 4. Fund Investment Consultant Examination. Thailand Securities Institute November 2014 Fund Investment Consultant Examination Paper 4 Thailand Securities Institute November 2014 Copyright 2014, All right reserve Thailand Securities Institute (TSI) The Stock Exchange of Thailand Page 1 Paper

More information

Fixed-Income Securities Lecture 5: Tools from Option Pricing

Fixed-Income Securities Lecture 5: Tools from Option Pricing Fixed-Income Securities Lecture 5: Tools from Option Pricing Philip H. Dybvig Washington University in Saint Louis Review of binomial option pricing Interest rates and option pricing Effective duration

More information

FINS2624: PORTFOLIO MANAGEMENT NOTES

FINS2624: PORTFOLIO MANAGEMENT NOTES FINS2624: PORTFOLIO MANAGEMENT NOTES UNIVERSITY OF NEW SOUTH WALES Chapter: Table of Contents TABLE OF CONTENTS Bond Pricing 3 Bonds 3 Arbitrage Pricing 3 YTM and Bond prices 4 Realized Compound Yield

More information

Financial Engineering MRM 8610 Spring 2015 (CRN 12477) Instructor Information. Class Information. Catalog Description. Textbooks

Financial Engineering MRM 8610 Spring 2015 (CRN 12477) Instructor Information. Class Information. Catalog Description. Textbooks Instructor Information Financial Engineering MRM 8610 Spring 2015 (CRN 12477) Instructor: Daniel Bauer Office: Room 1126, Robinson College of Business (35 Broad Street) Office Hours: By appointment (just

More information

Detailed Overview of the Course Content

Detailed Overview of the Course Content FIN 4414 Financial Management Sections 2761 & 2762 Fall 2016 ** Updated 10/09/2016 ** Class meetings Section 2761: MW, Periods 5 & 6, HVNR 250 Section 2762: MW, Periods 7 & 8, HVNR 250 Professor: Farid

More information

The Poliwogg BioPharma M&A Index

The Poliwogg BioPharma M&A Index The Poliwogg BioPharma M&A Index Q4 2016 Industry Background Scientific Innovations Driving Opportunities: Increasing Understanding of Disease Mechanism Genomics Enabling Precision Medicine Better Therapeutics

More information

Chapter 14. Real Options. Copyright 2009 Pearson Prentice Hall. All rights reserved.

Chapter 14. Real Options. Copyright 2009 Pearson Prentice Hall. All rights reserved. Chapter 14 Real Options Real Options Real options is the analysis of investment decisions, taking into account the ability to revise future operating decisions. When valuing real assets, it is often helpful

More information

One Period Binomial Model: The risk-neutral probability measure assumption and the state price deflator approach

One Period Binomial Model: The risk-neutral probability measure assumption and the state price deflator approach One Period Binomial Model: The risk-neutral probability measure assumption and the state price deflator approach Amir Ahmad Dar Department of Mathematics and Actuarial Science B S AbdurRahmanCrescent University

More information

Introduction to Binomial Trees. Chapter 12

Introduction to Binomial Trees. Chapter 12 Introduction to Binomial Trees Chapter 12 Fundamentals of Futures and Options Markets, 8th Ed, Ch 12, Copyright John C. Hull 2013 1 A Simple Binomial Model A stock price is currently $20. In three months

More information

POSSIBILITY CGIA CURRICULUM

POSSIBILITY CGIA CURRICULUM LIMITLESSPOSSIBILITY CGIA CURRICULUM CANDIDATES BODY OF KNOWLEDGE FOR 2017 ABOUT CGIA The Chartered Global Investment Analyst (CGIA) is the world s largest and recognized professional body providing approved

More information

CHAPTER 10 OPTION PRICING - II. Derivatives and Risk Management By Rajiv Srivastava. Copyright Oxford University Press

CHAPTER 10 OPTION PRICING - II. Derivatives and Risk Management By Rajiv Srivastava. Copyright Oxford University Press CHAPTER 10 OPTION PRICING - II Options Pricing II Intrinsic Value and Time Value Boundary Conditions for Option Pricing Arbitrage Based Relationship for Option Pricing Put Call Parity 2 Binomial Option

More information

BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani Pilani Campus Instruction Division

BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani Pilani Campus Instruction Division FIRST SEMESTER 2017-2018 Course handout (Part-II) Date: 1/07/2017 In addition to part-i (General Handout for all courses appended to the timetable) this portion gives further specific details regarding

More information

Profitable Growth : Why Acquisitions Matter at Least in Some Industries

Profitable Growth : Why Acquisitions Matter at Least in Some Industries Profitable Growth : Why Acquisitions Matter at Least in Some Industries SAMBA plus SAM-Talk: Zurich, 29 th of April 2014 By: Dr. Thomas W. Schrepfer, MBA, LL.M. 1 Agenda 1 Profitable Growth 2 3 4 Organic

More information

Understanding Investments

Understanding Investments Understanding Investments Theories and Strategies Nikiforos T. Laopodis j Routledge Taylor & Francis Croup NEW YORK AND LONDON CONTENTS List of Illustrations Preface xxni xxix Parti Chapter 1 INVESTMENT

More information

Real Options and Game Theory in Incomplete Markets

Real Options and Game Theory in Incomplete Markets Real Options and Game Theory in Incomplete Markets M. Grasselli Mathematics and Statistics McMaster University IMPA - June 28, 2006 Strategic Decision Making Suppose we want to assign monetary values to

More information

The New German and Austrian Thresholds

The New German and Austrian Thresholds August 2018 Antitrust Health Care Chronicle 2 impact of the new german and austrian merger control thresholds on licensing agreements On 9 July 2018, the German and Austrian competition authorities (the

More information

TEST OF BOUNDED LOG-NORMAL PROCESS FOR OPTIONS PRICING

TEST OF BOUNDED LOG-NORMAL PROCESS FOR OPTIONS PRICING TEST OF BOUNDED LOG-NORMAL PROCESS FOR OPTIONS PRICING Semih Yön 1, Cafer Erhan Bozdağ 2 1,2 Department of Industrial Engineering, Istanbul Technical University, Macka Besiktas, 34367 Turkey Abstract.

More information

University of Washington at Seattle School of Business and Administration. Management of Financial Risk FIN562 Spring 2008

University of Washington at Seattle School of Business and Administration. Management of Financial Risk FIN562 Spring 2008 1 University of Washington at Seattle School of Business and Administration Management of Financial Risk FIN562 Spring 2008 Office: MKZ 267 Phone: (206) 543 1843 Fax: (206) 221 6856 E-mail: jduarte@u.washington.edu

More information

Midterm Review. P resent value = P V =

Midterm Review. P resent value = P V = JEM034 Corporate Finance Winter Semester 2017/2018 Instructor: Olga Bychkova Midterm Review F uture value of $100 = $100 (1 + r) t Suppose that you will receive a cash flow of C t dollars at the end of

More information

Master of Science in Finance (MSF) Curriculum

Master of Science in Finance (MSF) Curriculum Master of Science in Finance (MSF) Curriculum Courses By Semester Foundations Course Work During August (assigned as needed; these are in addition to required credits) FIN 510 Introduction to Finance (2)

More information

Notes for Lecture 5 (February 28)

Notes for Lecture 5 (February 28) Midterm 7:40 9:00 on March 14 Ground rules: Closed book. You should bring a calculator. You may bring one 8 1/2 x 11 sheet of paper with whatever you want written on the two sides. Suggested study questions

More information

Join with us https://www.facebook.com/groups/caultimates/ Professional Course: Syllabus 2016

Join with us https://www.facebook.com/groups/caultimates/ Professional Course: Syllabus 2016 Syllabus Structure Module V Paper 14: Strategic Financial Management A Investment Decisions 35% D 30% A 35% B Financial Markets and 20% Institutions C Security Analysis and Portfolio 15% Management D Financial

More information

MFE/3F Questions Answer Key

MFE/3F Questions Answer Key MFE/3F Questions Download free full solutions from www.actuarialbrew.com, or purchase a hard copy from www.actexmadriver.com, or www.actuarialbookstore.com. Chapter 1 Put-Call Parity and Replication 1.01

More information

XOMA LTD /DE/ FORM 10-Q (Quarterly Report) Filed 8/9/2006 For Period Ending 6/30/2006

XOMA LTD /DE/ FORM 10-Q (Quarterly Report) Filed 8/9/2006 For Period Ending 6/30/2006 XOMA LTD /DE/ FORM 10-Q (Quarterly Report) Filed 8/9/2006 For Period Ending 6/30/2006 Address 2910 SEVENTH ST BERKELEY, California 94710 Telephone 510-644-1170 CIK 0000791908 Industry Biotechnology & Drugs

More information

Valuation of Options: Theory

Valuation of Options: Theory Valuation of Options: Theory Valuation of Options:Theory Slide 1 of 49 Outline Payoffs from options Influences on value of options Value and volatility of asset ; time available Basic issues in valuation:

More information

Estimating the Implied Required Return on Equity with a Declining Growth Rate Model

Estimating the Implied Required Return on Equity with a Declining Growth Rate Model Estimating the Implied Required Return on Equity with a Declining Growth Rate Model by Larry C. Holland, PhD CFA University of Arkansas at Little Rock Little Rock, AR 72204-1099 Email: lcholland@ualr.edu

More information

Math 5760/6890 Introduction to Mathematical Finance

Math 5760/6890 Introduction to Mathematical Finance Math 5760/6890 Introduction to Mathematical Finance Instructor: Jingyi Zhu Office: LCB 335 Telephone:581-3236 E-mail: zhu@math.utah.edu Class web page: www.math.utah.edu/~zhu/5760_12f.html What you should

More information

THE NEW VALUATION PARADIGM: REAL OPTIONS

THE NEW VALUATION PARADIGM: REAL OPTIONS THE NEW VALUATION PARADIGM: REAL OPTIONS Kerem Senel, Ph. D.* Abstract Conventional capital budgeting techniques such as the discounted cash flow analysis fail to recognize managerial flexibility that

More information

Shanghai Jiao Tong University. FI410 Corporate Finance

Shanghai Jiao Tong University. FI410 Corporate Finance Shanghai Jiao Tong University FI410 Corporate Finance Instructor: Xiaorong Zhang Email: xrzhang@fudan.edu.cn Home Institution: Office Hours: Fudan University Office: Term: 2 July - 2 August, 2018 Credits:

More information

2.1 Mathematical Basis: Risk-Neutral Pricing

2.1 Mathematical Basis: Risk-Neutral Pricing Chapter Monte-Carlo Simulation.1 Mathematical Basis: Risk-Neutral Pricing Suppose that F T is the payoff at T for a European-type derivative f. Then the price at times t before T is given by f t = e r(t

More information

MATH6911: Numerical Methods in Finance. Final exam Time: 2:00pm - 5:00pm, April 11, Student Name (print): Student Signature: Student ID:

MATH6911: Numerical Methods in Finance. Final exam Time: 2:00pm - 5:00pm, April 11, Student Name (print): Student Signature: Student ID: MATH6911 Page 1 of 16 Winter 2007 MATH6911: Numerical Methods in Finance Final exam Time: 2:00pm - 5:00pm, April 11, 2007 Student Name (print): Student Signature: Student ID: Question Full Mark Mark 1

More information

Binomial Option Pricing

Binomial Option Pricing Binomial Option Pricing The wonderful Cox Ross Rubinstein model Nico van der Wijst 1 D. van der Wijst Finance for science and technology students 1 Introduction 2 3 4 2 D. van der Wijst Finance for science

More information

UPDATED IAA EDUCATION SYLLABUS

UPDATED IAA EDUCATION SYLLABUS II. UPDATED IAA EDUCATION SYLLABUS A. Supporting Learning Areas 1. STATISTICS Aim: To enable students to apply core statistical techniques to actuarial applications in insurance, pensions and emerging

More information

Licensing Issues in the Life Sciences Industry: Negotiating University License Agreements

Licensing Issues in the Life Sciences Industry: Negotiating University License Agreements Licensing Issues in the Life Sciences Industry: Negotiating University License Agreements Monday, March 5, 2018 Scott J. Catlin, Associate Vice President for Technology Ventures at UR Ventures - University

More information

DEPARTMENT OF FINANCE. Undergraduate Courses Postgraduate Courses

DEPARTMENT OF FINANCE. Undergraduate Courses Postgraduate Courses DEPARTMENT OF FINANCE Undergraduate Courses Postgraduate Courses Undergraduate Courses: FINA 110 Fundamentals of Business Finance [3-0-0:3] For non-sb&m students. Introductory business finance. Topics

More information

Curriculum. Written by Administrator Sunday, 03 February :33 - Last Updated Friday, 28 June :10 1 / 10

Curriculum. Written by Administrator Sunday, 03 February :33 - Last Updated Friday, 28 June :10 1 / 10 1 / 10 Ph.D. in Applied Mathematics with Specialization in the Mathematical Finance and Actuarial Mathematics Professor Dr. Pairote Sattayatham School of Mathematics, Institute of Science, email: pairote@sut.ac.th

More information