Porter's five forces, founded in the 1980's, is the classical framework used to understand and analyze competitive forces in an industry. In the 1990's, a new framework was formed, the Value Capture Model. The Value Capture Model extends on previous frameworks in two ways. One, it formally describes competition as a

Porter's five forces is the most famous concept in strategy, and is a part of every business undergrad/MBA curriculum. The concept is a succinct yet brilliant way of describing the competitive forces in an industry. For banking, it is an immensely useful framework for industry analysis, a key part of

In our Capital Asset Pricing Model post, we discussed risk and return for stocks. We also discussed the use of the relationship to value stocks, by interpolating what the return for a stock should be given a certain level of risk. We will build on these concepts and discuss how

M&A Transaction Case Studies are commonly seen in case competitions, and sometimes in actual investment banking work. They are a quick analysis of an M&A transaction, summarized in a few PowerPoint slides. They can be a great way to prepare for interviews, while learning about the details of a transaction. Slide

It has become apparent to us that our website assumes a level of knowledge which may make it difficult for people newly interested in investment banking to jump into our interview section. So before someone goes from 0 to 60 and is asked about more advanced valuation concepts, we are going

An option contract is a financial instrument that gives the buyer the right, or option to buy or sell a stock on a future date, at a predetermined price. The party that writes, or sells the option has the obligation to fulfill the terms of the contract. There are two

In a previous article, we talked about CAPM and its applications. As a quick review, CAPM is a model used to calculate the expected return on a security, based on its market risk, commonly denoted as β (Beta). The model says that a security that is risky relative to the market

Bonds are debt contracts formed between a buyer and a seller of bonds. The buyer pays the seller some amount of cash, and in exchange the seller pays the buyer small semi-annual payments (coupons) and large final payment (principal). Essentially, the seller is borrowing from a non-bank entity. Every bond has

We talked extensively about valuing a stream of cash flows in the previous articles. By building on the idea of present value, we can use it to value more complex investments like stocks. We start our section on valuation with CAPM. The article covers several basic concepts in statistics. If you