Financial Modeling, Fourth Edition

by Benninga

ISBN: 9780262321693 | Copyright 2014

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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.

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

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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Contents (pg. vii)
Preface (pg. xxi)
From the Preface to the Third Edition (pg. xxv)
From the Preface to the Second Edition (pg. xxvii)
From the Preface to the First Edition (pg. xxix)
0: Before All Else (pg. 1)
Part I: Corporate Finance and Valuation (pg. 11)
1: Basic Financial Calculations (pg. 13)
2: Corporate Valuation Overview (pg. 53)
3: Calculating the Weighted Average Cost of Capital (WACC) (pg. 71)
4: Valuation Based on the Consolidated Statement of Cash Flows (pg. 117)
5: Pro Forma Financial Statement Modeling (pg. 127)
6: Building a Pro Forma Model: The Case of Caterpillar (pg. 161)
7: Financial Analysis of Leasing (pg. 179)
Part II: Portfolio Models (pg. 195)
8: Portfolio Models—Introduction (pg. 197)
9: Calculating Efficient Portfolios (pg. 221)
10: Calculating the Variance-Covariance Matrix (pg. 251)
11: Estimating Betas and the Security Market Line (pg. 273)
12: Efficient Portfolios Without Short Sales (pg. 291)
13: The Black-Litterman Approach to Portfolio Optimization (pg. 305)
14: Event Studies (pg. 331)
Part III: Valuation of Options (pg. 359)
15: Introduction to Options (pg. 361)
16: The Binomial Option Pricing Model (pg. 383)
17: The Black-Scholes Model (pg. 425)
18: Option Greeks (pg. 467)
19: Real Options (pg. 493)
Part IV: Valuing Bonds (pg. 515)
20: Duration (pg. 517)
21: Immunization Strategies (pg. 539)
22: Modeling the Term Structure (pg. 553)
23: Calculating Default-Adjusted Expected Bond Returns (pg. 579)
Part V: Monte Carlo Methods (pg. 605)
24: Generating and Using Random Numbers (pg. 607)
25: An Introduction to Monte Carlo Methods (pg. 655)
26: Simulating Stock Prices (pg. 675)
27: Monte Carlo Simulations for Investments (pg. 699)
28: Value at Risk (VaR) (pg. 723)
29: Simulating Options and Option Strategies (pg. 745)
30: Using Monte Carlo Methods for Option Pricing (pg. 775)
Part VI: Excel Techniques (pg. 821)
31: Data Tables (pg. 823)
32: Matrices (pg. 839)
33: Excel Functions (pg. 855)
34: Array Functions (pg. 899)
35: Some Excel Hints (pg. 913)
Part VII: Visual Basic for Applications (VBA) (pg. 943)
36: User-Defined Functions with VBA (pg. 945)
37: Variables and Arrays (pg. 989)
38: Subroutines and User Interaction (pg. 1023)
39: Objects and Add-Ins (pg. 1047)
Selected References (pg. 1073)
Index (pg. 1085)

Simon Benninga

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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