Valuation in Financial Markets Course (GBUS 7603) at Darden School of Business

The Valuation in Financial Markets course (GBUS 7603) at the Darden School of Business focuses on the valuation of financial assets and firms within the context of financial markets. It is only in Qtr 6 or Qtr 7 that the MBA and EMBA students will encounter the Valuation in Financial Markets course at the Darden School of Business because this is considered an intermediate or advanced finance course. Since it is not in the initial core classes, this course does not form part of not so pleasant the “Darden Grind.”

The course has changed over the years. For example in 2017 Professor David Tomio had this course structured in only two modules with the first module focused on valuing financial assets such as
options and fixed income securities. The second module focused on corporate valuation. Whereas, Professor Michael Schill has the course structured into three modules. While some details of the Darden advanced finance course Valuation in Financial Markets may have changed over the years, the course objectives have stayed the same.

GraduateTutor’s finance tutors offer online tutoring for the Valuation in Financial Markets course, Financial Management and Policies (FMP) I & II, and all other corporate finance, investment, and portfolio management courses offered at Darden, UVA. This page covers the following topics:

Course Objectives of the Valuation in Financial Markets (GBUS 7603) at the Darden School of Business

While Valuation in Financial Markets may have different professors, case studies and structures, the course objectives have stayed the same. Building on foundational finance concepts from earlier core finance courses, Financial Management and Policies encountered in Qtr 3 and 5, the Valuation in Financial Markets (GBUS 7603 EXEC) course aims to:

  • Help students really grasp the basics of valuation and reinforce the concept with multiple examples.
  • Learn how cash flows are divided between different types of debt and equity types, which are especially important in private equity and project financing.
  • Boost skills in valuing things like options and forward contracts, focusing on how they’re used to manage risk.

The Valuation in Financial Markets course prepares students for advanced careers in finance and equips them with the advanced valuation skills for other advanced finance electives offered at Darden.

Prerequisites for Valuation in Financial Markets Course GBUS 7603

The course builds on the knowledge gained in the core finance course, Financial Management and Policies. Students are expected to have a solid understanding of basic financial principles, particularly in firm valuation and financial analysis, before enrolling in this course.

Teaching Format for Valuation in Financial Markets Course (GBUS 7603)at Darden

The Valuation in Financial Markets course is delivered through a combination of lectures, case studies, and class discussions. Most of the learning is via case studies, so the emphasis and bulk of the time is spent on these case studies. Each session is designed to deepen students’ understanding of valuation techniques through practical applications in real-life investment or business settings. Students are expected to actively participate in the Valuation in Financial Markets class discussions, with grading reflecting their contribution to these sessions. The course also includes a final exam to assess individual understanding of the material. Starting with the basics of financial asset valuation and moving towards more complex topics:

  1. Equity Residual Approach – Using advanced valuation techniques in LBOs and project finance.
  2. Duration and Convexity – Understanding bond price sensitivity to interest rate changes.
  3. Term Structure of Interest Rates – Exploring the relationship between yields, spot rates, and forward rates.
  4. Interest Rate Swaps – Learning the principles of pricing and using interest rate swaps.
  5. Options and Convertible Bonds – Delving into the valuation of options and convertible bonds.
  6. Hedging with Derivatives – Applying derivative instruments to manage financial risks.

Valuation in Financial Markets Course Tutoring Plan

In prior years, Valuation in Financial Markets course (GBUS 7603) was comprised of two modules. Module 1 focused on on valuing options and fixed income assets especially complicated ones. The second module covered corporate valuation and stock pricing using a variety of valuation approaches. Today the Valuation in Financial Markets course (GBUS 7603) is organized into three sub-modules that guide students through different aspects of valuation.

Module 1 of Valuation in Financial Markets Class: Valuing Partitioned Cash Flow

In the first module, Valuing Partitioned Cash Flow, students are introduced to the concept of breaking down cash flows into distinct segments, such as cashflows to different types of equity and cashflows to different types of debt. This is a finance technique particularly useful in private equity and project financing. This module covers the fundamentals of equity residual cash flow, where students learn how to value equity by focusing on the cash flows available to equity holders after accounting for all other financial obligations. Through case studies like The House on Ramsay Street and Hat in Hand: Financing the LBO of Clear Channel, students explore the practical applications of these techniques in leveraged finance and other complex financial situations. By the end of this module, students gain a solid foundation in equity residual cash flow valuation.

Module 2 of Valuation in Financial Markets Class: Valuing Assets via Arbitrage-Based Approaches

The second module, Valuing Assets via Arbitrage-Based Approaches, delves into the principles of arbitrage and how they can be applied to value various financial instruments. This module emphasizes the importance of understanding interest rate risk and the role of forward markets in managing this risk. Students are introduced to derivative instruments such as options and forwards, learning how to use arbitrage to determine their fair value. Case studies, including Standard Integrated Circuits and Principal Protected Equity Linked Note, provide real-world contexts for applying these valuation techniques. This module equips students with the analytical tools needed to navigate the complexities of arbitrage-based valuation and enhances their ability to manage financial risks effectively.

Module 3 of Valuation in Financial Markets Class: Challenging Cases

The final module, Challenging Cases, is designed to put students’ valuation skills to the test with advanced scenarios that mirror real-world challenges in financial markets. This module covers topics like the valuation of convertible bonds and the strategic considerations in mergers and acquisitions, as seen in cases like Tesla, Inc. Convertible Bonds and Canadian Pacific’s Bid for Norfolk Southern. These cases require students to apply all the concepts and techniques learned throughout the course, integrating their knowledge to solve complex financial problems. The focus on challenging, real-world scenarios ensures that students are well-prepared to tackle the valuation issues they will encounter in their professional careers, making this module a critical capstone to their learning experience.

This structure ensures that students build their knowledge progressively, preparing them for more complex financial analysis and decision-making.

Case Studies Used in Valuation in Financial Markets at Darden

The Valuation in Financial Markets course incorporates several case studies to illustrate the practical application of valuation techniques. Key case studies used in the Valuation in Financial Markets course include:

  1. Bond Price Sensitivity to interest rate changes – Case study of Norfolk Southern Railway – Century Bonds
  2. Leveraged Finance – Cases such as Hat in Hand: Financing the LBO of Clear Channel and Lonestar Graphite.
  3. Pricing Strips and the Term Structure – Understanding the term structure of interest rates.
  4. Options and Option Pricing – Practical examples such as Principal Protected Equity Linked Note and Options Contracts and Their Valuation.
  5. Dominion Gas Holdings, LLC – Anticipatory Interest Rate Hedging – A deep dive into interest rate swaps and their valuation.
  6. Mogen Inc – Exploring the valuation of convertible bonds.
  7. Lonestar Graphite – Applying the Equity Residual Approach to valuation in an LBO transaction.
  8. Equity Residual Cash Flow – Introduction to equity residual cash flow, with cases like The House on Ramsay Street and a note on Equity Residual Valuation.
  9. Project Finance – Exploring tax equity financing with cases like EDP Renewables North America.
  10. Advanced topics like convertible bonds and acquisition incentives, with cases such as Tesla, Inc. Convertible Bonds and Canadian Pacific’s Bid for Norfolk Southern.

These are only indicative HBS/Darden/Ivy finance case studies used in the Valuation in Financial Markets course at Darden. Professors may use different finance cases from the HBS/Darden/Ivy case studies library to bring various finance concepts to life.

Required Textbook for Valuation in Financial Markets at Darden

The Valuation in Financial Markets course primarily uses case studies and instructor-provided materials. However, a supplementary text is Principles of Corporate Finance by Richard Brealey, Stewart Myers, and Franklin Allen. While not mandatory, this textbook provides additional background reading for students interested in further deepening their understanding of the topics covered in class.

Key Questions Addressed in Valuation in Financial Markets at Darden

Throughout the Valuation in Financial Markets course, students will explore several key questions, including:

  • How do duration and convexity affect a bond’s price sensitivity to interest rate changes?
  • What factors influence the term structure of interest rates, and how are these modeled?
  • How are complex financial instruments like interest rate swaps and options priced?
  • What are the benefits and risks associated with different valuation methodologies, including DCF and the Equity Residual Approach?
  • How are equity residual cash flows used in firm valuation, particularly in private equity?
  • What are the merits and techniques of partitioning cash flow for valuation purposes?
  • How can derivative instruments like options and forwards be valued and used in risk management?
  • What are the best practices for valuing hybrid securities and applying financial engineering tools?

Teaching Faculty for the Valuation in Financial Markets Course

Many professors have taught the Valuation in Financial Markets course at Darden. Each of them brings their unique expertise to the course.

  1. Professor Robert Bruner is a highly respected finance professor and former dean of Darden. He is known for his expertise in valuation, corporate finance, and mergers and acquisitions.
  2. Professor Kenneth M. Eades specializes in corporate finance and valuation. He has been a key faculty member at Darden, bringing his extensive research and teaching experience to the Valuation in Financial Markets course.
  3. Professor Pedro Matos specializes in asset management and international finance. He teaches various finance courses at Darden, including those related to valuation.
  4. Professor Susan Chaplinsky specializes in corporate finance, including capital structure and financial markets. She has been involved in teaching valuation at Darden, for over a decade and mostly in the area of financial asset valuation.
  5. Professor Yiorgos Allayannis is an expert in risk management and corporate financial policy. He has taught valuation courses at Darden mostly around the applications of valuation techniques in financial markets.
  6. Professor Michael Schill brings extensive expertise in corporate finance and valuation, focusing on practical applications of valuation techniques in financial markets.
  7. Professor Richard Evans is known for his research in investment management and financial markets.
  8. Professor Robert Conroy specializes in international finance and valuation. He is a key figure in the finance department at Darden, offering students a deep dive into valuation principles and their application in global financial markets.
  9. Professor Samuel Bodily specializes in decision analysis, risk management, and strategic financial decisions.
  10. Professor Phillip E. Pfeifer specializes in financial analysis and valuation.

Grading in the Valuation in Financial Markets Course at Darden

Grading in the Valuation in Financial Markets course is based on two main components:

  1. Class Participation (40%) – Active and regular participation in class discussions is critical.
  2. Final Exam (60%) – The exam assesses individual comprehension and application of the course material.

Professors have also given weekly practice questions in the past. These questions/quizzes have also been part of the final grade in the past. However, this is not part of the grade today.

Tutoring for the Valuation in Financial Markets Course at Darden

GraduateTutor’s finance tutors offer online tutoring for the Valuation in Financial Markets course and all other corporate finance, investment, and portfolio management courses offered at Darden, UVA, including Financial Management and Policies (FMP) I & II. Please email or call us if we can provide you with corporate finance tutoring for Financial Management and Policies 1 & 2, Valuation in Financial Markets course, or any one of the finance courses from the finance department at Darden, UVA listed above. Or, for that matter, any other quantitative course you will encounter in a b-school program.

Sign Up Now