Session 2: The Bermuda Triangle and Approaches to Valuation

Bringing in the effects of uncertainty and complexity, I argued that these three (bias, uncertainty and complexity) forces are the biggest challenges to good valuation.We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. With each approach, we talked about the types of assets that are best priced with that approach and what you need to bring as an analyst/investor to the table. For instance, in our discussion of DCF valuation and how to make it work for you, I suggested that there were two requirements: a long time horizon and the capacity to act as the catalyst for market correction.
Start of the class test: https://www.stern.nyu.edu/~adamodar/p...
Slides
Introduction to Valuation: https://www.stern.nyu.edu/~adamodar/p...
Post class test:https://www.stern.nyu.edu/~adamodar/p...
Post class test solution: https://www.stern.nyu.edu/~adamodar/p...