Finance topics

Here at Breaking Down Finance, we believe that an investment in knowledge pays the best interest. Moreover, by breaking down finance concepts into manageable pieces Our objective is to provide unbiased information on finance topics. We try to explain finance concepts as simple as possible, but not simpler. In doing so, we hope to provide new as well as seasoned investors the tools that allow will allow them to make important financial decisions.

To this end, we start off by explaining some of the basic concepts and definitions. We then move on to topics such as modern portfolio theory, bond valuationequity valuation and derivative valuation. Thereafter, we discuss topics on risk management and how insights in behavioral finance can improve you performance by not making easily avoidable mistakes.Where possible, we provide examples as well as an implementation in Microsoft Excel.

  • Finance basics

    Any firm house built, started by laying sound foundations. Therefore, we have selected some ‘finance basics’ that anyone with a strong interest in finance should master before moving on to more complex topics.

  • Modern portfolio theory

    In this part, we discuss modern portfolio theory (MPT). This topic is strongly related to investment diversification. The approaches we discuss, can help investors to determine optimally diversified portfolios.

  • Bond valuation

    The path to learning valuation of assets starts by learning bond valuations. Bond valuation is the essence and most easiest case on which any other valuation model is built.

  • Equity valuation

    The next step in valuation covers equity valuation. In what follows, we explain how equity can be valued based on the dividend discount model.

  • Derivative valuation

    Derivatives are financial products which value depends on another variable. This can for example be a stock price, an interest rate, a foreign exchange rate, commodity prices but also depend on the temperature, defaults and other variables.

  • Risk management

    All investment portfolios have the objective realizing returns, therefore they’re exposed to different sources of risk. Portfolios are exposed to market risk: price, volatility and correlation, interest rate or currency changes

  • Behavioral finance

    Behavioral finance analyses how investors’ cognitive biases and emotions impact trading behavior and performance. Behavioral finance uses findings from psychology, sociology, and finance to analyse how psychological and social factors impact investment decisions.