ISBN-10:
0262027283
ISBN-13:
9780262027281
Pub. Date:
04/18/2014
Publisher:
MIT Press
Financial Modeling / Edition 4

Financial Modeling / Edition 4

by Simon Benninga

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Overview

Financial Modeling / Edition 4

A substantially revised edition of a bestselling text combining explanation and implementation using Excel; for classroom use or as a reference for finance practitioners.

Financial Modeling is now the standard text for explaining the implementation of financial models in Excel. This long-awaited fourth edition maintains the “cookbook” features and Excel dependence that have made the previous editions so popular. As in previous editions, basic and advanced models in the areas of corporate finance, portfolio management, options, and bonds are explained with detailed Excel spreadsheets. Sections on technical aspects of Excel and on the use of Visual Basic for Applications (VBA) round out the book to make Financial Modeling a complete guide for the financial modeler.

The new edition of Financial Modeling includes a number of innovations. A new section explains the principles of Monte Carlo methods and their application to portfolio management and exotic option valuation. A new chapter discusses term structure modeling, with special emphasis on the Nelson-Siegel model. The discussion of corporate valuation using pro forma models has been rounded out with the introduction of a new, simple model for corporate valuation based on accounting data and a minimal number of valuation parameters.

New print copies of this book include a card affixed to the inside back cover with a unique access code.Access codes are required to download Excel worksheets and solutions to end-of-chapter exercises.If you have a used copy of this book, you may purchase a digitally-delivered access code separately via the Supplemental Material link on this page. If you purchased an e-book, you may obtain a unique access code by emailing digitalproducts-cs@mit.edu or calling 617-253-2889 or 800-207-8354 (toll-free in the U.S. and Canada).

Praise for earlier editions
“Financial Modeling belongs on the desk of every finance professional. Its no-nonsense, hands-on approach makes it an indispensable tool.”
—Hal R. Varian, Dean, School of Information Management and Systems, University of California, Berkeley

Financial Modeling is highly recommended to readers who are interested in an introduction to basic, traditional approaches to financial modeling and analysis, as well as to those who want to learn more about applying spreadsheet software to financial analysis."
—Edward Weiss, Journal of Computational Intelligence in Finance

“Benninga has a clear writing style and uses numerous illustrations, which make this book one of the best texts on using Excel for finance that I've seen.”
—Ed McCarthy, Ticker Magazine

Product Details

ISBN-13: 9780262027281
Publisher: MIT Press
Publication date: 04/18/2014
Series: The MIT Press
Edition description: fourth edition
Pages: 1144
Sales rank: 375,254
Product dimensions: 7.20(w) x 9.30(h) x 1.80(d)
Age Range: 18 Years

About the Author


The late Simon Benninga was 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.

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
Appendix 1: A Rule of Thumb for Calculating Debt Betas ..... 49
Appendix 2: Why Is [beta] Such a Good Measure of Risk? Portfolio [beta] versus Individual Stock [beta] ..... 51
Appendix 3: Getting Data from the Internet ..... 52
3: Financial Statement Modeling ..... 57
Appendix 1: Calculating the Free Cash Flows When There Are Negative Profits ..... 83
Appendix 2: Accelerated Depreciation in Pro Forma Models ..... 84
4: Using Financial Statement Models for Valuation ..... 89
5: The Financial Analysis of Leasing ..... 101
Appendix: 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
Appendix 1: Adjusting for Dividends ..... 146
Appendix 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
Appendix: 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
Appendix: 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
Appendix: Cell Errors in Excel and VBA ..... 516
32: Types and Loops ..... 519
33: Macros and User Interaction ..... 539
34: Arrays ..... 557
35: Objects ..... 581

Appendix: Excel Object Hierarchy ..... 601
References ..... 603
Index ..... 611

What People are Saying About This

Robert Taggert

"I've learned a great deal from the first two editions of Simon Benninga's Financial Modeling, and the Third Edition offers both new topics and updated coverage of topics from earlier editions. The book gives clear,
well-illustrated instructions for using Excel software to solve finance problems,
ranging from basic to highly sophisticated, in both corporate finance and investments. The many excellent examples draw on actual company data, and the book gives useful tips on obtaining current data from the internet. Financial Modeling is an outstanding resource for finance professionals, instructors and students. As with earlier editions, I plan to keep my copy close at hand."--Robert A. Taggart,
Professor of Finance, Carroll School of Management, Boston College

George M. Constantinides

"The new edition of Simon Benninga's Financial Modeling is a comprehensive and effective learning-by-doing tool in motivating users and making easily accessible the concepts of modern corporate finance, investments, and derivatives. In the real world of finance, its clear step-by-step approach empowers the practitioner to search the internet for financial data, build programs to analyze them, and make sound financial decisions. I strongly recommend it to the finance student and practitioner alike."--George Constantinides, Leo Melamed Professor of Finance, The University of Chicago Graduate School of Business

Robert A. Taggart

I've found earlier editions of Simon Benninga's Financial Modeling to be a great reference, and I've used them often. The fourth edition again offers helpful tips for using Excel in the most efficient and powerful manner to solve finance problems. These tips are illustrated in clear, step-by-step fashion so that the reader can start using them right away. The fourth edition also offers an improved flow of topics within the primary headings of Corporate Finance and Valuation, Portfolio Models, Valuation of Options, Valuing Bonds, and Monte Carlo Methods, along with updated examples and exercises. Financial Modeling continues to be a valuable resource for practicing finance professionals, students, and professors.

Endorsement

I've found earlier editions of Simon Benninga's Financial Modeling to be a great reference, and I've used them often. The fourth edition again offers helpful tips for using Excel in the most efficient and powerful manner to solve finance problems. These tips are illustrated in clear, step-by-step fashion so that the reader can start using them right away. The fourth edition also offers an improved flow of topics within the primary headings of Corporate Finance and Valuation, Portfolio Models, Valuation of Options, Valuing Bonds, and Monte Carlo Methods, along with updated examples and exercises. Financial Modeling continues to be a valuable resource for practicing finance professionals, students, and professors.

Robert A. Taggart, Professor of Finance, Carroll School of Management, Boston College

From the Publisher

I've found earlier editions of Simon Benninga's Financial Modeling to be a great reference, and I've used them often. The fourth edition again offers helpful tips for using Excel in the most efficient and powerful manner to solve finance problems. These tips are illustrated in clear, step-by-step fashion so that the reader can start using them right away. The fourth edition also offers an improved flow of topics within the primary headings of Corporate Finance and Valuation, Portfolio Models, Valuation of Options, Valuing Bonds, and Monte Carlo Methods, along with updated examples and exercises. Financial Modeling continues to be a valuable resource for practicing finance professionals, students, and professors.

Robert A. Taggart, Professor of Finance, Carroll School of Management, Boston College

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