Print Print

CM F65B - Financial Models in Excel* (Full Semester course)

Faculty
Peter Raahauge
Course Coordinator
Claus Parum
Prerequisite/progression of the course
The course is oriented towards a second year master student (at CBS) with the following background: Master course in portfolio theory, master course in bond and option analysis, undergraduate course in math (matrix algebra and optimization), and an undergraduate course in statistics. Basic Excel-skills are required.
Course content, structure and teaching
The aim of the course is to provide capabilities of practical implementation of financial theory using real world data. Moreover, the course participants will gain a deeper understanding of the financial theory as well as improve their Excel and programming skills.
Financial topics:
  • Stock portfolio analysis, US data, (The efficient frontier with or without short-sale, testing the CAPM, evaluating portfolio strategies with Monte Carlo).
  • Performance evaluation of Danish investment funds.
  • Options pricing using, US data, (Black-Scholes pricing, implied volatility, binomial grids for European, American, and Bermuda options, Monte Carlo methods for exotic options).
  • Volatility prediction models, US stock data, (Moving average, ARCH, GARCH).
  • Bond analysis, Danish data, (Immunization strategies, term structure estimation, callable bond pricing in binomial grids).
Spreadsheet topics:
  • Normal spreadsheet skills (Names, array functions, matrix/vector calculation, the Excel-solver, regression analysis etc.),
  • Introduction to Visual Basic Application function programming.
  • Online import of empirical data to Excel via the CBS-connection to Datastream.
The course is practically oriented. For each of the 14 topics dealt with, there will be Excel-exercises to solve using empirical data. Guiding solutions will be available.
For each of the 14 topics, there will be approx. 2 hours of lectures introducing or reviewing the financial theory and spreadsheet techniques necessary for solving the exercises. These lectures will be available as online-lectures via the internet.
For discussions, problem solving, and individual guidance, 2x15 hours are scheduled.
Learning Objectives
At the exam, the students should be able to recognize and to implement in Excel the right method for solving problems similar to the ones dealt with during the course. These problems includes forming portfolios with or without restrictions, evaluating investment performance, testing the CAMP, pricing European, American, Bermudan, Asian and Lookback options, predicting volatility, Simulating portfolio strategies, form immunization strategies for bond portfolios, estimate term structures, price standard bonds as well as callable bonds.
Also, the students should be able to modify the methods used during the course to deal with problems slightly different from the problems dealt with during the course.
Type of examination, exam aids and assessment
4 hour individual open book computer exam
Recommended literature
Benninga, S., "Financial Modelling, using Excel", 3rd edition, 2008, MIT-press.
Notes and exercises
Other
If the number of course participants allow, the course will be offered as a quarter as well as a full semester version.
The computational methods used in Financial Models in Excel provide a stronger starting point for understanding and working with advanced issues in courses like Asset Allocation.

Last updated by The Electives Office 31/01/2010