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Finanaicla Modelling Course Hand out

CHO of FM

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Kaushik Bhattacharjee
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44 views

Finanaicla Modelling Course Hand out

CHO of FM

Uploaded by

Kaushik Bhattacharjee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Course: FINANCIAL MODELLING

Course Coordinator:
Email:

Term: 5th Trimester Credits: 2

Course Introduction

Students have already been introduced to various concepts in Finance and the basics of Excel. This
course will attempt to widen and deepen their knowledge of financial theory and practice by
explaining how financial models and techniques can be implemented with the help of Excel
spreadsheets. The course of financial modelling is meant to cover nuances and intricacies of preparing
a financial model in MS Excel using the best modelling practices.

Course Objectives

 Familiarize students with the popular financial models


 Understand dos and don’ts of preparing a financial model
 Identify the characteristics of various financial models and compare their pros and cons
 Use VBA in MS Excel to automate a repetitive process
 Develop skills in translating financial models into spreadsheets using MS Excel.

Program Learning Goals Covered through this Course

This program is intended to be imparted to cover the following learning goals –


 Design and implement a financial model with the help of tools and techniques learnt
 Appraise valuation models related to stocks, bonds and derivatives
 Measure mutual fund performance and select optimal portfolios
 Appreciate concepts like financial statement analysis & forecasting, and risk in capita
budgeting

Pedagogy

 The program will be imparted by using case studies for preparing a financial model on an
identified sector and quiz to evaluate learned concepts
 Selected practical areas will be covered to explain suitable options available in MS Excel for
problem solving
 VBA functionalities will be discussed to automate a few repetitive tasks to bring efficiency in
problem solving

Linkages with Other Courses


 This course covers accounting concepts and is, therefore, directly linked to financial accounting,
 This course covers theories of financial management and therefore linked to financial
management

Evaluation Component

 VBA and MS Excel Quiz (Individual) 15%


 Financial Modelling Quiz (Individual) 15%
 Financial Modelling Assignment (Group) 30%
 End Term Evaluation 40%

Suggested Text Book

 Financial Modeling in Excel for Dummies, Danielle Stein Fairhurst

Additional Readings

1. Excel Bible, John Walkenbach


2. Mastering Financial Modelling Financial Modelling in Microsoft Excel , Alastair L. Day
3. Financial Modeling Using Excel and VBA, Chandan Sen Gupta
4. Benninga, S. (2014), Financial Modeling, The MIT Press
5. Sengupta, C. (2010), Financial Analysis and Modeling- Using Excel and VBA, Wiley, India
6. Day, A. L. (2009), Mastering Financial Modelling in Microsoft Excel, Prentice Hall
7. Damodaran, A. (2006), Damodaran on Valuation, Wiley India
8. Barlow, J. F. (2005) Excel Models for Business and Operations Management, Wiley, India
9. Mayes and Shank (2015) Financial Analysis with Microsoft Excel® 2013, 7th edition, Cengage
10. Kapil, S. (2022), Financial Valuation and Modeling, First edition, Wiley India.
11. Hull, John C (2023), Options, Futures and Other Derivatives ; Pearson, 11th Edition
12. Reilly and Brown (2022), Investment Analysis and Portfolio Management , 11th Edition

Session Plan (each session of 90 min. unless specified otherwise)

Session Topic and Sub topics Reading


Reference/Cases(*)
1-2 Financial Modelling
- Introducing Financial Modeling . Fairhurst, Chapter
- Planning and Designing a Financial Models: Documenting, 1,2
Debugging , Auditing and Learning Excel modelling
- Revising Excel Functions: Financial ,Logical , Statistical ,
mathematical , Lookup and other Reference Functions ,Date
and Time functions , Text functions
3-4 VBA Macros Fairhurst, Chapter3
- Introduction and basics and 4
- Recording Macros and deciphering code
- Understanding the usage of InputBox and MsgBox in response
capturing
- Creating UDF
5 Time value of Money and Cost of Capital Sengupta, C.
- Loan amortization , calculating EMIs (2010), Chapter 14
- Calculating the cost of capital: Beta calculations Mayes and Shank
- Modelling and Testing CAPM (2015), Chapter 7

6 Capital Budgeting Benninga


- Risk in capital budgeting (2014),Chapter 11
- Sensitivity Analysis and 12
- Scenario Analysis
7 Financial Statement Analysis and Bankruptcy Forecasting Sengupta, C.
Models (2010), Chapter 9
- Financial Indicators; Common size, Ratios Fairhurst, Chapter10
- Forecasting of Financial Statements
- Altman’s Z score
8 Stock Valuation models Fairhurst, Chapter11
- Dividend Discount Mode Damodaran ,
- FCFF/FCFE Chapter 7
10 Portfolio Analysis Chapters 8 & 10,
- Mean and Standard Deviation of a multi stock portfolio Benninga, S. (2014)
- Variance Covariance Matrix
11 Mutual Funds Reilly and Brown
- Performance measurement and comparison across schemes (2022), Chapter 18
Modelling Equity Returns and Extreme Risk Models Hull (2023),
9 - Single and Multi-period Returns Chapter 22
- VaR (Value at risk)
12 Modelling Fixed Income Securities Chapter 10,
- Pricing Sengupta, C. (2010)
- Duration, Modified Duration Hull (2023)
- Convexity Chapter4

13 Option Pricing Models Hull (2023),


(2 hrs.) - Option Basics Chapter 11,15
- Model Assumptions (Binomial and Black and Scholes)
- Implementing Formulae

* Using real life data in Excel to manipulate results with various inputs

Other Instructions

 Students are expected to bring laptop in each class for hands-on workouts

Any Other Detailed Instructions / Information (optional)

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