Financial Modelling with Excel

FIE435 Financial Modelling with Excel

Spring 2022

  • Topics

    You just started your first job as a consultant or as a financial analyst for a large international firm.

    After the first few days with the firm you meet your first client together with your boss.

    During the meeting the client shows you a new project and wants to know from your company if the project is feasible and how much time it will take to recover the cost from the investment.

    You have to determine capital investment, forecast income statement and cash flow, calculate net present value, the internal rate of return and the payback period. Your boss is expecting you to come up with a model that answers these questions in order to make a recommendation to the client.

    In the next days your boss asks you to construct an optimal portfolio for a client. You’re going to have to construct the portfolio, explain the to your boss the results and assumptions you made. Based on your model your company is going to make a recommendation to the client.

    Spreadsheets are an essential tool used by banks, consulting firms and companies today.

     

    You, as the analyst have to be:

    1)the finance expert

    2)the spreadsheet specialist

    3)the graphic designer

     

    In this course the students will have to apply their finance knowledge and modeling skills by constructing a wide variety of spreadsheet models and communicating the output in a relevant, comprehensible way

    Main topics:

    Excel tables, matrices, functions

    Present Value, Net Present Value and Internal Rate of Return with Excel

    Data collection and preparation from different sources

    Bonds valuations, Immunizations and the term structure of interest rates

    Efficient portfolios and the CAPM

    Estimating Beta and the Security Market Line and Efficient portfolios with and without constraints in VBA

    Arbitrage Pricing Theory and multi-factor models in VBA

    Event studies

    Option valuations, the binomial model and the Black-Scholes model with VBA

    Monte Carlo Simulations to Simulate Asset Prices and price derivatives with Excel

  • Learning outcome

    Learning outcome:

    • In this course the students will have to apply their finance knowledge and modeling skills by constructing a wide variety of spreadsheet models and communicating the output in a relevant, comprehensible way.

     

    The student at the end of the course will be able to:

    Knowledge:

    • Understand the objective of financial modelling
    • Understand the principles of portfolio management

    Skills:

    • Download financial data from the internet
    • Undertake a range of financial and statistical calculation with Excel
    • Clearly communicate the results of the model
    • Use the results of the model to support decision making
    • Understand how different assumptions impact on the results
    • Better understand in practice the financial theory underlying the models

    General competence:

    • Being able to use Excel to solve practical financial problems

  • Teaching

    The course is taught using a combination of lectures and practical classes.

    In each practical class the students will be given a problem that has to be solved within groups.

    It will be possible to follow the course digitally.

  • Recommended prerequisites

    It is recommended that students have taken or a taking a course on investments such as FIE400E.

  • Required prerequisites

    None.

  • Compulsory Activity

    Course approval is based on the problem sets

  • Assessment

    Exam with multiple elements.

    The grade is determined as follows:

    Group problem sets including a peer review (40%)

    1 hour individual digital home exam (60%)

    The exam will be written in English and has to be answered in English.

    All the three parts of the assessment must be completed in the same semester.

  • Grading Scale

    A-F

  • Computer tools

    None

  • Literature

    Simon Benninga, Financial Modeling (fourth edition), 2014.

    John C. Hull, Options, Futures and Other Derivatives, Pearson Prentice Hall, 2014

    Additional materials will be provided for some topics.

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Spring. Offered spring 2022.

Course responsible

Assistant Professor Roberto Ricco, Department of Finance, NHH.