FIE435 Financial Modelling with Excel

• 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 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 communicate 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

  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.

  At the end of the course, the student will be able to:

  Knowledge

  • Understand the objective of financial modelling.
  • Understand the principles of portfolio management.
  • Understand how different assumptions impact the results.
  • Better understand in practice the financial theory underlying the models.

  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.

  General competence

  • 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 to be solved in class.

• Recommended prerequisites

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

• Required prerequisites

  None.

• Compulsory Activity

  Problem sets.

• Assessment

  The grade is determined by a 3 hours individual digital school exam. Students should make sure that their computer can run Excel smoothly.

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

• 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.

• Permitted Support Material

  Calculator 

  One bilingual dictionary (Category I) 

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/ and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/