Strategy, Value and Risk: A Guide to Advanced Financial Management(Global Financial Markets)

The final quarter of the twentieth century witnessed the beginnings of a transformation - the decline of the industrial economy and rise of the information economy. Innovations in information technology facilitated the globalization of markets, production and capital markets, which spurred competition across business and finance. This transformation has created a global economy that is increasingly centered around the knowledge infrastructure, new business models, intangible assets and services, open innovation and network economies. Strategy as a search for value is the discovery and development of sources of profitability to maximize firm value. Regardless of the trends in the global economy, the central management issue is still the same. To achieve sustainable shareholder value, firms have to simultaneously deliver on operations in the short-term, while investing in the long-term to maintain continuity. Strategy, Value and Risk: A Guide to Advanced Financial Management examines this issue within the context of innovation, the evolution of industry sectors, and financial analysis, corporate finance, quantitative finance and risk management concepts. The short-term is addressed within the context of financial statement analysis and forecasts, stocks and flows, and ROCE and ROIC ratios. The long-term is examined using investment analysis techniques that include advanced accounting, DCF, ENPV and real options, a corporate finance concept that applies financial options theory to real assets using quantitative and derivative methods. These techniques are applied to real assets within the context of strategy in case studies that cover corporate IT, energy, pharmaceutical drug development, climate-change and growth, media and abandonment, and commercial real estate to illustrate the concepts and issues. This 3rd Edition features new strategy and analysis of performance sections, and updated introduction, value, risk and case study sections, that together provides a framework to examine the interrelationships between strategy, value and risk.

Table of Contents:
List of Figures and Tables Preface Acknowledgements Introduction The external environment Strategy, value and risk References THE EVOLUTION OF STRATEGY, VALUE AND MEASURING RISK Strategy Innovation and the entrepreneur The evolution of industry sectors From corporate planning to shareholder value Strategy and value Appendix - The classification of industry sectors References Value Overview The accounting foundations Stocks and flows Ratio analysis Investments References Risk Investment risk Why manage risk Defining and measuring risk The risk drivers Value and risk References THE ANALYSIS OF PERFORMANCE AND INVESTMENTS The Analysis of Performance Valuation Firm Asset Debt Equity Residual earnings Free cash flows Pro forma analysis References The Analysis of Investments Introduction A corporate software upgrade An energy natural gas power plant Pharmaceutical research and development Growth, adaption and continuity Firm abandonment The sale of corporate real estate assets References QUANTITATIVE ANALYTICS AND METHODS Data Analysis Data and information Time series analysis Volatility The lognormal distribution Which volatility? References Derivatives Futures, forwards and options The replicating portfolio and risk-neutral valuation References Option Pricing Methods A model for asset prices The Black-Scholes formula Numerical techniques References Implementing Derivative Models Spot price models Forward curve models Alternative real options methods Model risk Real option portfolios and complex payoffs References Conclusion and Practical Implications Index

About the Author :
JAMIE ROGERS is a consultant based in New York, USA. He has extensive experience in a range of areas that include valuation and risk management in the financial, energy and commodity markets, corporate finance and derivatives.

Review :
'For the reader looking for a clear and concise introduction to real options, this book hits the spot. While the focus is on real options analysis, Rogers provides a pleasing blend of financial engineering, modern finance, and accounting-based valuation, all with the view of understanding the value from strategies and all under the eye of an informed, experienced practitioner' - Stephen H. Penman, George O. May Professor of Accounting, Columbia Business School, New York, USA 'Real option theory represents an innovative approach to valuation. This book does a sound job of blending theory and practice. The inclusion of case studies is useful. The addition of material on corporate finance theory and financial statement in the Second Edition enhances the utility of the book.' - Satyajit Das, Risk Consultant and author 'Jamie Rogers' compact treatment of real options invites managers to learn the field by studying its stories and successes, with just enough theory to demonstrate the rigor of thought beyond the case studies. No manager can fully understand modern strategy and valuation without some knowledge of real options, and this book provides a strong starting point.' - David C. Shimko, Chief Risk Officer, NewOak Capital, New York, USA 'The idea that options exist in almost every decision scenario is intuitively sensible. What we need to do is recognize them, assess their value and include that value in the decision making process. This concise book effectively gets those two basic ideas over in a manner that can be understood by even the most mathematically-challenges executives.' - Maria Barbera, Innovations E-newsletter