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By Simon Benninga
Too frequently, finance classes cease wanting creating a connection among textbook finance and the issues of real-world enterprise. Financial Modeling bridges this hole among conception and perform via offering a nuts-and-bolts advisor to fixing universal monetary versions with spreadsheets. Simon Benninga takes the reader step-by-step via every one version, displaying the way it should be solved utilizing Microsoft Excel.
The long-awaited 3rd variation of this average textual content keeps the "cookbook" beneficial properties and Excel dependence that experience made the 1st and moment variations so renowned. It additionally deals major new fabric, with new chapters protecting such issues as financial institution valuation, the Black-Litterman method of portfolio optimization, Monte Carlo tools and their functions to alternative pricing, and utilizing array services and formulation. different chapters, together with these on uncomplicated monetary calculations, portfolio versions, calculating the variance-covariance matrix, and producing random numbers, were revised, with many providing considerably new and superior fabric. different components coated contain financial plan modeling, leasing, general portfolio difficulties, price in danger (VaR), actual suggestions, length and immunization, and time period constitution modeling. Technical chapters deal with such themes as information tables, matrices, the Gauss-Seidel strategy, and counsel for utilizing Excel. The final element of the textual content covers the visible simple for purposes (VBA) ideas wanted for the publication. The accompanying CD comprises Excel worksheets and strategies to end-of-chapter exercises.
Praise for the former editions:
"Benninga has a transparent writing type and makes use of a number of illustrations, which make this publication the most effective texts on utilizing Excel for finance that I've seen."
—Ed McCarthy, Ticker Magazine
"The writer describes this as a 'cookbook' and that's an outstanding analogy.... Its breadth is large, overlaying easy current valuing and value of capital ... to the likes of actual techniques and early workout of American-style options.... A important acquisition."
—Paul Dentskevitch, Risk Magazine
"Financial Modeling is highly-recommended to readers who're attracted to an creation to uncomplicated, conventional techniques to monetary modeling and research, in addition to to those that are looking to examine extra approximately using spreadsheet software program to monetary analysis."
—Edward Weiss, Journal of Computational Intelligence in Finance
"Financial Modeling belongs at the table of each finance expert. Its no-nonsense, hands-on procedure makes it an vital tool."
—Hal R. Varian, Dean, college of data administration and platforms, college of California, Berkeley
"This is utilized finance conception for the pro at its top. As a pupil, I and numerous others learnt the intricacies of Lotus and monetary thought from Professor Benninga's first book—Numerical concepts in Finance. Now, as a certified, i don't need to 're-invent the wheel' in Excel. a useful advisor. A needs to for all monetary analysts."
—Vikas Nath, international Strategist, rising fairness Markets, Union financial institution of Switzerland, London
Read or Download Financial Modeling (3rd Edition) PDF
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Additional info for Financial Modeling (3rd Edition)
Example text
5. Of course you’re going to live much longer! And I wish you good health! The dimensions of this problem have been chosen to make it fit nicely on a page. 23 Basic Financial Calculations There are several ways to solve this problem. The first involves Excel’s Solver. 6 Clicking on the Solver makes a dialog box appear. In the following illustration we’ve filled it in. 6. If the Solver does not appear on the Tools menu, then you have to load it. Go Tools|Add-Ins and click Solver Add-In on the list of programs.
The net present value (NPV) is the applicable concept here. Denoting by r the discount rate applicable to the investment, the NPV is calculated as follows: N CFt ( 1 + r )t t =1 NPV = CF0 + ∑ where CFt is the investment’s cash flow at time t and CF0 is today’s cash flow. Suppose, for example, that the series of five cash flows of $100 is sold for $250. 08. 08 <-- =B5+NPV(B2,B6:B10) The NPV represents the wealth increment that accrues to the purchaser of the cash flows. 08 in wealth today. In a competitive market the NPV of a series of cash flows ought to be zero: Since the present value should correspond to the market price of the cash flows, the NPV should be zero.
I also want to thank my editors, who again have been a great help: Nancy Lombardi, Peter Reinhart, Victoria Richardson, and Terry Vaughn. As always I welcome suggestions and comments. il Preface to the First Edition Like its predecessor Numerical Techniques in Finance, this book presents some important financial models and shows how they can be solved numerically and/or simulated using Excel. In this sense this is a finance “cookbook”; like any cookbook, it gives recipes with a list of ingredients and instructions for making and baking.