FIE435 Financial Modelling with Excel
Autumn 2022Spring 2023
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
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
Option valuations, the binomial model and the Black-Scholes model with VBA
Monte Carlo Simulations to Simulate Asset Prices and price derivatives with Excel
- 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:
- Understand the objective of financial modelling
- Understand the principles of portfolio management
- 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
- Being able to use Excel to solve practical financial problems
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.
It is recommended that students have taken or a taking a course on investments such as FIE400E.
A problem sets
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.
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.
- ECTS Credits
- Teaching language
Spring. Offered spring 2022.
Assistant Professor Roberto Ricco, Department of Finance, NHH.