Course Outline

Subject Name : Financial Modeling

Instructor : Surendra Poddar
Academic Year : 2016 - 17
Trimester : VI
Duration :
Sessions : 20 sessions of 1.5 hours duration each
Credit Points : 3 credit course

1. Course Description and Objectives

Finance managers need not only the understanding of financial theory and models, but
also knowledge of modelling tools like binomial trees, Monte Carlo simulation,
regression analysis and the spreadsheet implementation of these models. It is this gap
between financial theory, modeling frameworks and spreadsheet implementation, which
this course attempts to fill.

The expected learning outcomes of this course are

a. Advanced knowledge of Excel functions , macros, data tables and modeling

tools

b. Advanced financial theory of interest rate modeling, valuation of exotic

options, real options, credit risk modeling etc.

c. Mathematical modeling tools like Binomial trees, Monte Carlo simulation,

Regression Analysis.

2. Pedagogy:-

The course will consist of class discussion, followed by spreadsheet class exercises. Every
topic would be followed by a spreadsheet assignment. There would also be a comprehensive
financial modeling end term project.

Readings
a. Textbook

Financial Analysis and Modeling Using Excel and VBA by By Chandan Sengupta ,
Publisher : Wiley

b. Reference Books :

i. Financial Modeling by Simon Benninga , MIT press

ii. Using Excel for Business Analysis by Danielle Stein Fairhurst , Wiley

iii. Modeling Structured Finance Cash Flows using Excel : Keith Allman
 Course Outline

iv. Building Financial Models with Microsoft Excel : K Scott Proctor , Wiley
Finance

v. Mathematics of Financial Modeling and Investment management

Focardi and Fabozzi

vi. Derivatives Markets- Mcdonalds

vii. Financial Models Using Simulation and Optimization II: Investment

Valuation, Options Pricing, Real Options, & Product Pricing Models-
Wayne Winston , Publisher : Palisade

3. Evaluation

Mid Term Examination : 20%

End Term Examination : 20%
Quiz : 10%
Individual Short Assignments : 30%
Group Project : 20%

4. Attendance Policy : As per institute policy

5. Contact Details of Instructor

Email : s.poddar@imi-k.edu.in

Mobile : 9331010226

6. Detailed Session Plan

Session Topic Chapter /Readings

No.
1 Overview of the course objectives and Reading to be given
learning outcomes, birds eye view of Chapter 31,33 and 34 , Simon
the course. Beninga
Tools for Financial Modeling -1
Array functions and Matrices
Data tables

2 Tools for Financial Modeling -2 Chapters 6-8 , Fairhurst

Macros
Form Controls
3-4 Financial Statement Modeling Chapter 13 , Sengupta
5-6 Equity and Firm Valuation Modeling ( DCF Class Exercise
 Course Outline

and LBO)
7 Modeling Volatility Chapter 28 Derivatives Markets
Historical Volatility and Implied by McDonalds
Volatility
Time varying volatility : EWMA,
ARCH and GARCH model
8 Hedging and pricing volatility: Chapter 29 Derivatives Markets
Variance and volatility swap by McDonalds
VIX
CEV model
Heston Model
9 Black Litterman Portfolio Optimization Chapters 8-10 and 12-13
Financial Modeling , Simon
Beninga
10 Modeling for Event Studies Chapter 14 Financial Modeling ,
Simon Beninga
11 Value at Risk Modeling Chapter 7 , Value at Risk ,
Philippe Jorion
12-13 Modeling the term structure of interest rates Readings to be given
14 Pricing structured securities Chapter 19, Beninga
15 Blacks model of options valuation Chapter 18 Sengupta
16 Monte Carlos methods for pricing exotic Chapter 25 Hull
options
17 Valuing real options Chapter 34 , Hull
18-19 Modeling Structured Finance Reference (3)
20 Student Presentations