The purpose of this course is to familiarize the students with private equity firms, and valuation of private equity investment. In an imperfect market, Private Equity firms provide an important financial intermediation service by facilitating start-ups' and small firms' access to equity funds. Therefore, it is important to understand how Private Equity firms operate, and what is needed to attract them to a market. Furthermore, valuation of private equity investments poses a problem as standard DCF methods are not applicable, and real options method is required. This course starts with an introduction to valuation of derivative securities as background for real options, and proceeds to discussion of private equity.