FIN 3616 Financial Modelling in Practice
FIN 3616 Financial Modelling in Practice
A central element of the job of any professional in corporate finance, fund management, security analysis, or risk management is the real-world application of financial theories to provide quantitative answers to various problems. As those theories are usually presented in a sterile, simplified environment for pedagogical reasons, it is often not straightforward how they can be implemented in practice. This course aims at showing students how the sometimes abstract models and theories are used to address real-world problems encountered in practice. The practical implementation of the theories and models also facilitates the complete understanding of them. Additionally the students will be benefited by having created throughout the course a collection of templates that can be readily used later on in practice.
Probably the most widely used tool by financial practitioners is Excel. During the course students will learn how to use this powerful program to apply a series of financial models which the students will likely have encountered in their previous courses. For each concept applied the course will provide a brief overview of the relevant theory or model but focus mostly on the practical side of the implementation. It will explain how these models can be implemented in Excel using its built-in functions, matrix calculation, and programming language (VBA). The course will also highlight which real-world financial data is the appropriate input for those models. It will point out different modeling options and discuss advantages and limitations of those approaches. The content of the course will employ theories that have been taught in previous classes. In various areas, the course will delve deeper and provide students with state of the art models that go beyond what was covered in previous courses. Thus, a good understanding of the material covered in the previous finance courses is required to fully benefit from this course.
The students will acquire a good understanding of how different financial models can be efficiently implemented with the help of a spreadsheet program. More specifically the students will develop an understanding of the following topics:
- Basic financial calculations (present value, future value, NPV, IRR, etc)
- Portfolio optimization and Black-Litterman model
- Corporate valuation model (WACC, enterprise value)
- Excel VBA programming
- Monte Carlo simulation in Excel
During the acquisition of the above mentioned knowledge the students will acquire the following skills:
- Advanced Excel handling: functions, matrix calculation, Excel solver, data table
- Solving optimal portfolio in Excel, such as:
- How to solve retirement planning problem in Excel
- How to construct optimal portfolio using historical data and Excel
- Working knowledge of Bloomberg
- Solve financial problems using Excel, such as:
- How to evaluate stock price using corporate valuation theory
- Programming skills in Excel VBA, such as:
- How to write new functions in Excel VBA
- Simulate financial models in Excel
The students having successfully completed this course will be able not only to apply the various finance models and theories taught throughout their studies but also understand the applicability of these theories in light of the working assumptions required for those theories to be useful in practice.
- Introduction to Excel and Bloomberg
- Valuation and Capital Budgeting
- Portfolio Choice and Black-Litterman Model
- CAPM and Cost of Capital
- Excel VBA Programming
- Monte Carlo Simulation in Excel
Excel provides a completely digital platform that can easily connect data, analysis, and results. To take advantage of this digital platform, this course provides students trainings to describe, abstract, and solve challenging problems in a digital way. Given the global impact of Excel, mastering Excel is essential for the international job market.
The course will include a combination of lectures and computer workshops. The lectures will focus on the exposition of the relevant theories as well as the exposition of the assumptions and limitations of the theories. The workshops will be based on hands-on experience of both the implementation of the models and the development of Excel capabilities. One or more workshop sessions will be spent on Bloomberg with the focus on how to obtain and transfer data to Excel. Data used during the semester can also come from other sources such as Yahoo Finance, WRDS, etc.,
The lectures will be plenary sessions. The computer workshops (Excel and Bloomberg workshops) are structured in a way in which the lecturer uses their computer to show students how to work with data and solve problems and then gives students the chance to repeat and follow the shown steps using their own computers. Students may be provided a virtual machine during the semester to use during the computer workshops that will run the same version of Excel and same operating system for all students. This will allow students to have a common learning environment and software platform to use during the Workshops, which may be in the classroom or held online through Zoom.
Coursework requirements must be met prior to the final exam. The final exam is worth 100% of the course grade and is a comprehensive examination that tests the knowledge of any topics and material covered during the semester in and out of the classroom (e.g., textbook chapters, asynchronous material, lectures, computer workshops, homework assignments, etc.,). The coursework requirements are homework assignments in groups of 2 to 4 students and due throughout the semester (with no individual submissions allowed). The assignments are assessed approved or not approved, and require working on all tasks presented while showing a good understanding of the associated knowledge and skills being assessed in the assignments. It is not possible to re-sit coursework requirements. If coursework requirements are not met the student loses the right to take the final exam, and the student must take the entire course again. It is also not possible to request a grade justification or grading appeal for coursework requirements.
Course is taught in English. Depending of the pace of the course (e.g., Covid-19 limitations, general skill set of students at the beginning of the course, etc.,), there may be deviations in teaching and learning activities and exam, compared to what is described in this course description.
Students who do not get the coursework requirements approved, are not allowed to take the exam. This means that they must take the entire course again when completing it later.
Students who do not pass the written exam or who wish to improve their grade must take a new continuation exam upon later completion of the course.
Higher Education Entrance Qualification
Disclaimer
Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.
FIN 3521 Corporate Finance or EXC3671 Corporate Finance, or equivalent.
| Mandatory coursework | Courseworks given | Courseworks required | Comment coursework |
|---|---|---|---|
| Mandatory | 6 | 4 | There will be given 6 submission tasks of which 4 must be approved, in order to sit for exam. Submissions must be in groups of 2-4 students and submitted within deadline and as instructed through ItsLearning. |
| Assessments |
|---|
Exam category: School Exam Form of assessment: Written School Exam - pen and paper Exam/hand-in semester: First Semester Weight: 100 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Final Exam Exam code: FIN 36161 Grading scale: ECTS Resit: Examination every semester |
| Activity | Duration | Comment |
|---|---|---|
Teaching | 14 Hour(s) | The teaching consist of 7 sessions of 2 hours each taught live, |
Seminar groups | 14 Hour(s) | Computer workshops. The workshops consist of 7 sessions of 2 hours each taught live through computer laboratories. |
Digital resources | 14 Hour(s) | 7 hours of digital asynchronous material complementing the lectures and 7 hours of digital asynchronous material complementing practical computer workshops. |
Feedback activities and counselling | 12 Hour(s) | Tutoring students in their coursework requirements throughout the semester. |
Prepare for teaching | 30 Hour(s) | |
Submission(s) | 84 Hour(s) | |
Student's own work with learning resources | 32 Hour(s) |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.