Financial Modeling / Edition 3

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Too often, finance courses stop short of making a connection between textbook finance and the problems of real-world business. Financial Modeling bridges this gap between theory and practice by providing a nuts-and-bolts guide to solving common financial models with spreadsheets. Simon Benninga takes the reader step by step through each model, showing how it can be solved using Microsoft Excel®. In this sense, this is a finance "cookbook," providing recipes with lists of ingredients and instructions.

Areas covered include computation of corporate finance problems, standard portfolio problems, option pricing and applications, and duration and immunization. The second edition contains six new chapters covering financial calculations, cost of capital, value at risk (VaR), real options, early exercise boundaries, and term structure modeling. A new technical chapter contains a potpourri of tips for using Excel®.

Although the reader should know enough about Excel® to set up a simple spreadsheet, the author explains advanced Excel® techniques used in the book. The book includes chapters dealing with random number generation, data tables, matrix manipulation, and VBA programming. It also comes with a CD-ROM containing Excel® worksheets and solutions to end-of-chapter exercises.

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Editorial Reviews

From the Publisher
For the 2nd Edition: "Benninga has a clear writing style and uses numerous illustrations, which make this book one of the best texts on using Excel for finance thatI've seen." Ed McCarthy Ticker Magazine

For the 2nd Edition: "The author describes this as a 'cookbook'and that is a good analogy.... Its breadth is extensive, covering simple present valuing and cost of capital... to the likes of real options and early exercise of American-style options.... Aworthwhile acquisition." Paul Dentskevitch RiskMagazine

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Product Details

  • ISBN-13: 9780262026284
  • Publisher: MIT Press
  • Publication date: 2/29/2008
  • Edition description: third edition
  • Edition number: 3
  • Pages: 1168
  • Sales rank: 716,476
  • Product dimensions: 7.00 (w) x 9.00 (h) x 1.56 (d)

Meet the Author

Simon Benninga is Professor of Finance and Director of the Sofaer International MBA program at the Faculty of Management at Tel-Aviv University. For many years he was a Visiting Professor at the Wharton School of the University of Pennsylvania.

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Table of Contents

Preface to the First Edition
I Corporate Finance Models 1
1 Basic Financial Calculations 3
2 Calculating the Cost of Capitol 27
App. 1 A Rule of Thumb for Calculating Debt Betas 49
App. 2 Why Is [beta] Such a Good Measure of Risk? Portfolio [beta] versus Individual Stock [beta] 51
App. 3 Getting Data from the Internet 52
3 Financial Statement Modeling 57
App. 1 Calculating the Free Cash Flows When There Are Negative Profits 83
App. 2 Accelerated Depreciation in Pro Forma Models 84
4 Using Financial Statement Models for Valuation 89
5 The Financial Analysis of Leasing 101
App The Tax and Accounting Treatment of Leases 111
6 The Financial Analysis of Leveraged Leases 115
II Portfolio Models 129
7 Portfolio Models - Introduction 131
App. 1 Adjusting for Dividends 146
App. 2 Continuously Compounded versus Geometric Returns 148
8 Calculating the Variance-Covariance Matrix 151
9 Calculating Efficient Portfolios When There Are No Short-Sale Restrictions 161
Appendix 179
10 Estimating Betas and the Security Market Line 185
11 Efficient Portfolios without Short Sales 199
12 Value at Risk (VaR) 209
App How to Bootstrap: Making a Bingo Card in Excel 219
III Option-Pricing Models 229
13 An Introduction to Options 231
14 The Binomial Option-Pricing Model 253
15 The Lognormal Distribution 277
16 The Black-Scholes Model 297
17 Portfolio Insurance 311
18 Real Options 329
19 Early Exercise Boundaries 343
App Proof 358
IV Bonds and Duration 361
20 Duration 363
21 Immunization Strategies 381
22 Modeling the Term Structure 393
23 Calculating Default-Adjusted Expected Bond Returns 401
24 Duration and the Cheapest-to-Deliver Problem for Treasury Bond Futures Contracts 417
V Technical Considerations 429
25 Random Numbers 431
26 Data Tables 443
27 Matrices 449
28 The Gauss-Seidel Method 457
29 Excel Functions 461
30 Some Excel Hints 479
VI Introduction to Visual Basic for Applications 491
31 User-Defined Functions with Visual Basic for Applications 493
App Cell Errors in Excel and VBA 516
32 Types and Loops 519
33 Macros and User Interaction 539
34 Arrays 557
35 Objects 581
App Excel Object Hierarchy 601
References 603
Index 611
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Customer Reviews

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Sort by: Showing all of 6 Customer Reviews
  • Posted March 16, 2009

    Nice reference source

    I am pleased to have a single source for many of the formulas I use in my day-to-day CPA/tax practice. For those who use Microsoft Office style spreadsheets, the disc accompanying the book is a real time saver; even those who use Apple iWork/Numbers can benefit from the data included.

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