The hottest Financial Models Substack posts right now

Silicon Valley focuses on 'temporal arbitrage', which is about making money over time by investing at different stages of a startup's growth. This helps investors bridge gaps between early ideas and established companies.
The modern venture capital system divides funding into specific stages, like seed and series rounds. Each investor specializes in different stages, making the process smoother and more efficient.
Success in venture capital often comes from being part of a shared consensus on what makes a company fundable. Investors try to follow trends rather than go against the grain to align with what other investors believe.

Investors need a clear understanding of the problem a startup is solving, focusing on why it's worth solving and who faces the problem.
For a successful pitch to investors, startups must present a business model beyond just pricing, detailing revenue streams, competitive advantage, and key economics.
In the world of venture capital, the potential for startups to become billion-dollar companies is crucial for investors, impacting funding decisions and the overall success of the venture.

TradFi 2.0 refers to a next-level iteration of traditional finance that mixes with new innovations. This means using technology to improve and change how financial systems work.
Decentralized finance (DeFi) aims to provide financial services without central authorities. It represents a shift towards transparency and independence in finance.
Critiques are common within DeFi spaces to ensure that protocols are held accountable. It's important to recognize mistakes and learn from them for better future decisions.

The financial model of journalism has undergone significant changes with the rise of the Internet.
Monetization challenges impact the quality of journalism, often favoring sensational content over in-depth reporting.
There is a need to explore alternative financial models to address journalism's current challenges.

The Combinatorial Purged Cross-Validation (CPCV) method is superior in financial analytics for reducing overfitting risks.
SPX options data analysis finds limitations in accurately capturing implied volatility using Volterra Bergomi models.
Incorporating Risk premia strategies in portfolios can lessen left-tail exposure, but diversification within options requires maximizing volatility parameters.

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The collapse of Long-Term Capital Management had significant implications for the finance industry.
One possible reason for LTCM's downfall was overreliance on sophisticated modeling.
Although LTCM had managed its leverage tightly, it still faced a perilous downfall due to a combination of factors.

Ignoring risk in investments is a big mistake. You need your own way to measure and manage risk because investments have different levels of risk.
Using numbers is important for valuing companies, but don't forget the stories behind them. The results in numbers should reflect the company's real situation.
Keep your methods simple. A straightforward approach, like CAPM, can be useful, and it's important to question and refine your risk assessment regularly.

You don't need to believe cash flows last forever to do a discounted cash flow (DCF) analysis. There are ways to estimate cash flows that make sense even if the asset doesn't last indefinitely.
Terminal value is very important in DCF calculations, so you can use methods like annuities or liquidation value to estimate it. These options can provide a realistic view of an asset's worth without assuming it will last forever.
One common mistake is using market multiples for terminal value, which can skew the true value of a business. It's better to focus on cash flows and intrinsic value rather than just market pricing.

Vulnerability Conditional Risk Measures help assess risk during financial crises. They focus on understanding tail risks in the market.
Research on heavy-tailed risks can show how certain extreme events might develop. It looks into the behavior of sums of risk factors.
New studies in finance are slowly changing how we understand and measure risk. Keeping up with these developments can improve investment strategies.

Fama and French found that traditional models like CAPM don't explain stock returns well, especially over long periods. They looked for other factors that might explain differences in returns better.
They discovered that smaller companies and those with low price-to-book ratios tended to have higher returns. They saw these factors as signs of risk rather than market inefficiencies.
In deciding between using CAPM or their proxy models, it often depends on your goal. For evaluating past performance, proxy models work well, but for future return predictions, sticking with CAPM is usually better.

The equity risk premium (ERP) is important for estimating returns when valuing companies. It's useful to track how it changes, especially during market crises.
A forward-looking approach to ERP, rather than a past-centric one, helps predict stock returns better. You can find tools online to calculate current ERP using market indexes.
Investors react differently to changes in ERP: contrarians see it as a buying opportunity, momentum investors might follow trends, and some may choose to stay in cash until things stabilize.