Finance
An obsession with yellow
In Arles, Van Gogh chased a yellow so intense he had to steel himself to reach it. This room chases the business equivalent: the cash a company really produces, and how safely it can keep producing it.
“I had to key myself up a bit to reach the high yellow note…”Vincent van Gogh to Theo, Arles, 24 March 1889
Five pages, in the order a financial decision runs: what a business is worth, which projects to fund, how a share behaves in a portfolio, how much could be lost, and how bonds and options are priced. Results update as you type, and every assumption stays on the page.
Valuation
What a business is worth: the cost of capital, then its cash flows discounted at that rate.
- Cost of capital (CAPM, WACC)
- Discounted cash flow with sensitivity
Investment decisions
Which projects to fund, compared on NPV, IRR, MIRR, payback and profitability index.
- Capital budgeting for up to three projects
- NPV profile and crossover rate
- Capital rationing
Stock analysis
Return, risk and beta for a share against the market, and the portfolio mix with the best return for its risk.
- Returns, volatility, drawdown, Sharpe
- Beta and alpha by CAPM regression
- Efficient frontier
Risk management
How much a portfolio could lose on a bad day, whether the model has been right, and how a company’s credit looks.
- Value at Risk and Expected Shortfall
- Kupiec backtest
- Stress scenarios
- Altman Z-score
Bonds and options
Bond prices, yields, duration and convexity; option values, Greeks and implied volatility.
- Bonds
- Options (Black–Scholes–Merton)
Sources
- Van Gogh to Theo, Arles, 24 March 1889, letter 752.