Financial Modelling Simon Benninga

[Florencia Abila]

Assome guys have asked zest4alpha to recommend readings in financial modelling, today we would like to introduce to you one of the well-known books in this topic. The title of the book is Financial Modeling (3rd edition) by Simon Benninga.

As you can see from the above contents, the book offers a comprehensive guide to turn what we have learned in the theories into practical application. The steps Benninga shows to readers are very clear and in such a lucid way that you can easily apply. This is the reason why this book is suitable even with the beginners.

Zest4alpha has already studied numerous contents in Financial Modeling and found that they were very useful to actual finance/investment related tasks such as calculating NPV or IRR, building/projecting pro-forma financial statement, conducting equity valuation by Dividend Discount Model or Free Cash Flow Model, estimating beta/security market line, building efficient portfolios, etc.

Hope you guys can choose for yourselves the most useful readings to explore the power of financial modelling. If you have any further interesting sources, we appreciate all of your sharing and recommendations.

Financial Modeling has become the gold-standard text in its field, an essential guide for students, researchers, and practitioners that provides the computational tools needed for modelling finance fundamentals. This fifth edition has been substantially updated but maintains the straightforward, hands-on approach, with an optimal mix of explanation and implementation, that made the previous editions so popular. Using detailed Excel spreadsheets, it explains basic and advanced models in the areas of corporate finance, portfolio management, options, and bonds. This new edition offers revised material on valuation, second-order and third-order Greeks for options, value at risk (VaR), and Monte Carlo methods. The examples and implementation use up-to-date and relevant data. Parts I to V cover corporate finance topics, bond and yield curve models, portfolio theory, options and derivatives, and Monte Carlo methods and their implementation in finance. Parts VI and VII treat technical topics, with part VI covering Excel and R issues and part VII (now on the book's auxiliary website) covering Excel's programming language, Visual Basic for Applications (VBA), and Python implementations. Knowledge of technical chapters on VBA and R is not necessary for understanding the material in the first five parts. The book is suitable for use in advanced finance classes that emphasise the need to combine modelling skills with a deeper knowledge of the underlying financial models.

The explanations are concise and articulately presented and easy to understand (at least to someone with a small amount of mathematical skill). Excel spreadsheets and VBA are spread liberally throughout the book.

Part 1 explores basic financial calculations (including present value, discounted cash flows and payment schedules), capital and debt cost models, including the Gordon Dividend model. You also get case studies that use Kraft Corporation and Tyson Foods, financial statement modelling, bank valuation, leasing analysis

Part 3 has a comprehensive introduction to option pricing (including the binomial and Monte-Carlo methods), Greeks and more. I found the section on Monte-Carlo option pricing particularly helpful because of the practical Excel examples.

Parts 5 and 6 support the preceding chapters with topics on matrix math, Excel, VBA and a function reference. You also learn how to download financial data from Yahoo Finance with VBA. These two parts deliver a lot of value, and I learned many practical skills from this material

Mr. Samir excellent models you have developed for major stock indexex. Could you please also focus on Middle east markets such as Saudi Arabia Tadawul stcok index financial quotes as the yahoo tickers doesnt includes the tickers of saudi stock index. I would like to purchase your premium spreadsheets if you include tadawul index also so that i can get all the financial information & analysis for this index. The listed companies are limited to 161 only on this index.

An introduction to statistical techniques used in financial analysis and decision-making. Specific applications include capital budgeting, capital asset pricing model, arbitrage-pricing, portfolio modelling and the study of co-movements of different financial assets. The use of spreadsheets and related software tools is central to the learning experience of this subject to provide extensive opportunities to develop practical skills in financial analysis and modelling.

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Key Software/Platforms: Microsoft Excel, Bloomberg. As part of the requirements for Business School quality accreditation, the Bond Business School employs an evaluation process to measure and document student assessment as evidence of the extent to which program and subject learning outcomes are achieved. Some examples of student work will be retained for potential research and quality auditing purposes only. Any student work used will be treated confidentially and no student grades will be affected.

Introduction to basic spreadsheets techniques including, but not limited to, formatting, navigation, absolute and relative referencing, formulas, and functions. Spreadsheet design will focus around the concepts of standardisation, versatility, and reusability in order to familiarise students with common spreadsheet design practices.

Valuation of various cash flows including single payments, annuities, and perpetuities through the use of formulas, functions, and long-form spreadsheets. These techniques are then extended to the valuation of real world assets (e.g. stocks and bonds) with various cash flow patterns and assess overall investment performance.

Conditional statements and more advanced Excel functions (e.g VLOOKUP, Goal Seek) are used to introduce students to the concept of adaptive spreadsheets. Changes in parameters will not only require adjustments to values but techniques as well. With a focus on bonds and loans, students will be taught how to design spreadsheets that can react to the information provided by the user and adjust the process taken to achieve a set goal.

Construction of detailed cash flow series given a project description and its exposure to sunk and opportunity costs, taxes, inflation, growth rates and other factors. Assessment of project performance is extended through break even and sensitivity analyses, which also aids in the identification of key performance parameters.

Introduction to multiple financial performance techniques including, but not limited to, net present value (NPV) and internal rate of return (IRR) used to assess individual project cash flows. Advanced interest rate adjustment concepts are also introduced.

Use of new modelling techniques to identify ideal subsets of projects in order to maximise shareholder wealth. Apply various restrictions to the selection process including capital constraints and project relationships.

Simulation of more complex financial and portfolio models. Concepts such as capital budgeting and portfolio construction and forecasting are revisited to simulate results given a series of non-constant and unknown parameters (e.g. demand, returns, inflation etc.). Students are presented with various functions in Excel to handle non-uniform distributions.

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