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Chapter2: Portfolio Theory
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Chapter2: Portfolio Theory
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OverviewStructure of the Lecture
Chapter 1: Introduction / Principles of Corporate Finance
Chapter 2: Portfolio Theory
2.1 Valuation Under Risk
2.2 Risk and Return: Statistical Foundations
2.3 Risk and Return of Portfolios
2.4 Optimal Portfolio Choice
Chapter 3: Capital Asset Pricing Model
Chapter 4: Cost of Capital and Capital Structure
Chapter 5: Company Valuation (DCF‐Methods)
Slide Set #1
48
Corporate Finance ‐ Summer 2023
,Overview
Structure of this class
Investor Firm
Individual decision making Capital structure
Expected utility Choice of debt‐equity‐ratio
Portfolio optimization
Firm valuation
Markowitz portfolio selection Discounted Cash Flow
Financial Market
Capital Asset Pricing Model
expected return is dependent on systematic risk and market risk premium
expected returns of investors are cost of capital for firms
Slide Set #1
49
Corporate Finance ‐ Summer 2023
,Chapter 2.1: Valuation Under Risk
Introduction
Let‘s look back:
Semester 1: (Mostly Valuation and Decision Making under Certainty)
Data from investment and Certain
financing projects (certain) objectives
‐ Stream of payments
‐ Periodic figures ‐Productivity (Max!)
‐ ... Valuation
‐Present value (Max!)
‐ Financing instruments Principle
‐Costs p.a. (Min!)
‐ Rates of return
Now: Uncertainty
Slide Set #1
50
Corporate Finance ‐ Summer 2023
, Chapter 2.1: Valuation Under Risk
Introduction
Obtaining the data
(risk profile of the objective variable)
Processing the data
(valuation principles)
Slide Set #1
51
Corporate Finance ‐ Summer 2023
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