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Meeting your valuation needs for complex financial products
Do you need to value complex financial products such as convertible loan facilities with complex embedded options or investments in tranches of collateralized debt obligations (CDOs), or are you a valuation firm seeking to offer such services to your clients? We can help you by providing formal training courses or tailor-made, in-house training specific to your needs.
Formal training courses organised as modules covering:
- Introduction to basic option pricing theory (including the Black-Scholes model with the Merton adjustment for dividends, the Binomial Model and how to construct and use binomial lattices);
- How to gather and calculate the basic input information required for the valuation, such as the analysis of historical volatility, and forecasting the volatility of asset prices;
- Introduction to stochastic modelling and how to construct Monte Carlo simulation models using Excel spreadsheets.
- Running the models to calculate successive forecast asset prices, effectively sampling through the binomial lattice;
- How to build sophisticated algorithms into the simulation model to analyse and respond to the sequence of asset prices, in order to determine an option holder's choices in exercising options over the life of these options;
- Repeating the generation of sequences of asset prices a large number of times giving: the Monte Carlo process;
- Presenting the Monte Carlo simulation results, and their interpretation:
- How to calculate the mean (average), mode, median, upper and quartile points for the values of those factors relevant to the valuation of the complex financial instruments such as, for example, the value of the embedded options, the total value of the loans drawn down against a loan facility and, as a control, the enterprise value of the company at some specific future point in time;
- How to prepare and present the frequency distributions associated with the above factors and, in particular, identify the probabilities associated with the mean and mode points for each key factor;
- How to conduct appropriate sensitivity analyses to test the above models, and how one might best to present the results of these analyses.
Note: with regard to the development of valuation models to appraise collateralized debt obligations and other structured products, this work is still on-going. The rating agencies have developed sophisticated Monte Carlo simulation models for the purposes of rating such CDOs and similar complex financial products. Moody's, in particular, appear to have a very sound and powerful approach which is currently being evaluated for its applicability to, and/or for incorporation as part of, a valuation methodology for such assets and liabilities.
Tailor-made in-house training:
to include the development of stochastic models to address the valuation of toxic assets and liabilities or other complex financial products specific to the situation of the client company.
Location
We can arrange to conduct courses in the United Kingdom and in any other countries, world-wide.
Other option valuation assistance
Alternatively, we can provide you with our formal professional opinion as to the value of any of your companys toxic assets and liabilities or other complex financial products. We will work closely with your people in defining, and then gathering, the information relevant to any such valuation exercise. We will liaise with the auditors to address any concerns or queries raised by them and to ensure that their requirements for a credible, well supported and well documented conclusion of value are met.
Who should attend?
- Finance directors
- Investment bankers
- Chief accountants
- Company secretaries
- Other finance staff responsible for IFRS implementation
- Audit partners and specialist staff
- Valuation experts seeking to acquire expertise in valuing complex financial products.
How you will benefit
Our courses are tailored to the needs of our clients. For example, you may want your specialist financial/audit staff to receive in-depth training in all aspects of the valuation of toxic assets and liabilities, such as floating-strike look-back options embedded in convertible loan facilities or else investments in particular tranches of collateralized debt obligations. Alternatively, you may not intend to carry out the option valuation yourself but need to gain an overview of option valuation theory and methodologies. You may also want to gain a better understanding of your auditor's requirements. Our training will place auditors in a better position to carry out an audit of the value of options included in financial statements - whether the valuation has been prepared by the audit client or by an independent consultancy.
Contact
Please call Hugh Osburn on +44 (0) 1257 272899 or email: hjo@adopttraining.co.uk or enquiries@adopttraining.co.uk
Relevant articles available on this site: (see the Resources Section)
21. The role of Monte Carlo in the appraisal of complex financial instruments
Other material:
Pinnacle Training_3_Real Options & Decision Trees_slides_Oct 08