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PHBS Professor Publishes Textbook: Asset Valuation Theory

Time:2017-11-08 12:24:43  Hits:[]
Understanding asset valuation is important to those seeking work in the financial industry, applying for a bank loan, contemplating a potential merger, developing a succession plan, drafting a buy-sell agreement, or managing one’s own personal wealth. Asset Valuation Theory by PHBS Professor Frank Hugh (Fritz) Koger focuses on such issues. Recently published by Peking University Press, the book was born from Koger’s lecture notes for the graduate course of the same name.

Asset Valuation Theory
Language: English
Author : Frank Hugh Koger (U.S.)
 Peking University Press, 2017

Koger explains that asset valuation theory provides the theoretical framework of such courses as financial economics, corporate finance, fixed income securities and derivatives. So the purpose of his advanced quantitative treatment is to inspire readers to perform deeper and more profound analysis regarding valuation and drivers of value. Yet, Koger feels that the subject is treated in such a manner that the student can learn how to use valuation techniques and apply them to assets beyond those included in this book.
Given the relative technical strength of PHBS’s master of finance and master of quantitative finance students, Koger develops lectures with a higher level of mathematical treatment than that which is covered in many textbooks.
“The book is more succinct than most, focusing on quantitative techniques rather than qualitative descriptions,” Professor Koger further explains, “Other related textbooks often provide assumptions and key results, but my book’s treatment is more quantitative, concentrating on model development.”  

Professor Koger
Seven years ago, Koger joined Peking University HSBC Business School as a finance professor. Over the years he has developed and successfully executed three of the most popular finance courses at PHBS: Asset Valuation Theory, Financial Modeling, and Financial Modeling II.
His new book consists of 20 chapters that is grouped into 5 parts, and Koger says it is “not overly technical, as it doesn’t offer math for the sake of math, but focuses on solving the financial issues through effective quantitative techniques.” Part I reviews financial basics such as discounting cash flows, future values of cash flows and value additivity. Part II discusses metrics of risk and how these impact corresponding rewards that investors may expect. Part III focuses on equity valuation. Part IV examines valuation of fixed-income securities, focusing on fixed coupon bonds, and Part V deals with options.
To elaborate on quantitative techniques, the textbook focuses on model development from scratch, which trains the reader how to approach new applications. “We emphasize analytical skills. I want students to learn some finance,” he said in an interview, “but more important is the ability to rigorously attack financial issues.” Koger employs various charts and graphs to aid key concept exposition with innovative and unique perspectives. He then offers several results, such as an extensive exposition of a hybrid equity valuation technique (earnings multiplier model), clarification of a bond’s clean pricing between coupon dates, and determination of the probability of an American option’s early exercise.
As a CFA charter holder, Koger is also preparing students for the Chartered Financial Analyst (CFA) examinations as well as those associated with other valuable professional designations, such as the Financial Risk Manager (FRM). Demand for CFA and FRM certified professionals has increased multifold over the last few years, as growing insecurity in the current economic climate drives businesses to stress financial analysis and risk management practices. So Koger incorporates related fundamental issues and content related to CFA and FRM programs into the textbook. The related content emphasizing practical skills is designed to translate into work environments that graduates will face, utilizing Microsoft Excel to “build models and implement sound modeling techniques.”
Said Koger, “Many who have subsequently passed CFA examinations have commented on how helpful the PHBS course is in pursuing this valuable professional designation.” As he wrote in the Asset Valuation Theory preface, the book is not only appropriate for both advanced undergraduate students and graduate students with reasonably strong math skills, but also for practitioners looking for tools and techniques to enhance their abilities to tackle new challenges.

By Annie Jin 
Edited by Priscilla Young

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