Financial Modelling
| Module title | Financial Modelling |
|---|---|
| Module code | BEAM046 |
| Academic year | 2025/6 |
| Credits | 15 |
| Module staff | Dr Wei-Ming Lee (Convenor) |
| Duration: Term | 1 | 2 | 3 |
|---|---|---|---|
| Duration: Weeks | 0 | 11 |
| Number students taking module (anticipated) | 400 |
|---|
Module description
Summary:
This module equips you with the knowledge and tools to implement financial models using Excel or other statistical packages. The module covers a range of topics in finance drawn from corporate finance, portfolio theory, fixed income analysis, risk management and international finance. The emphasis of the module is on the practical application of finance theory, with lectures on each topic followed by in-depth practical classes, in which you will work through real world problems using Excel or other statistical packages.
Additional information:
Employability
This is an applied module that covers the implementation of quantitative financial models that are widely used in financial institutions such as investment banks, mutual funds and hedge funds, and in non-financial corporations.
Internationalisation
The content of this module is relevant to the finance industry in an international setting, with examples drawn from a number of global financial markets.
Sustainability
The sustainable operation of financial markets relies on the fact that security prices reflect the fair value of the future cash flows that they promise to pay. The fair valuation of security prices is maintained by the actions of investors, who exploit deviations from fair value through the implementation of financial models such as those covered in this module.
Research in Teaching
Some of the material covered in the module draws on research in the area of applied finance undertaken by the module convener, and either published in academic journals or used as a basis for commercial consultancy. Where appropriate, references to this research will be provided.
Module aims - intentions of the module
The aim of this module is to equip students with the knowledge and tools to implement financial models using Excel or other statistical packages. The course introduces students to the general principles of building financial models, as well as a number of specific financial modelling tools, including matrix calculations, optimisation, regression analysis, out-of-sample forecasting and simulation. These methods are applied to a range of practical problems in finance, including portfolio management, risk management, and currency valuation. The emphasis of the course is on practical application of the theory, with lectures on each topic followed by in-depth practical seminars .
Intended Learning Outcomes (ILOs)
ILO: Module-specific skills
On successfully completing the module you will be able to...
- 1. explain the objectives of financial modelling and the characteristics of financial data
- 2. download financial data from the internet for a range of securities, including stocks, bonds, derivatives and currencies
- 3. undertake a range of financial and statistical calculations in Excel
- 4. apply time series models to analyse and forecast return and volatility;
- 5. estimate the variance-covariance matrix of returns using several approaches
- 6. estimate the optimal passive portfolio of securities, with and without investment constraints
- 7. derive the optimal actively managed portfolio of securities
- 8. evaluate the risk of an investment portfolio
- 9. conduct sensitivity and scenario analysis using simulation techniques;
- 10. estimate models of the term structure of interest rates
ILO: Discipline-specific skills
On successfully completing the module you will be able to...
- 11. evaluate the characteristics of financial data and their statistical properties
- 12. explain the principles of passive and active portfolio management
- 13. estimate corporate and Treasury bond yields and yield curves
- 14. use simulation to model the unknown distribution of financial security returns
- 15. evaluate the characteristics and dynamic properties of the volatility of financial assets
ILO: Personal and key skills
On successfully completing the module you will be able to...
- 16. solve applied problems using Excel or other statistical packages
- 17. download and manipulate complex data
- 18. plan and undertake independent research
- 19. present your research in a professional manner
- 20. work effectively in teams
Syllabus plan
Possible topics include:
- Introduction
- Portfolio Optimisation
- Portfolio Management
- Risk Management
- Time Series Models
- Simulation Applications
- Modelling the Yield Curve
- Modelling the Exchange Rates
- Big Data in Finance
Learning activities and teaching methods (given in hours of study time)
| Scheduled Learning and Teaching Activities | Guided independent study | Placement / study abroad |
|---|---|---|
| 26 | 124 | 0 |
Details of learning activities and teaching methods
| Category | Hours of study time | Description |
|---|---|---|
| Scheduled learning and teaching activities | 202 | Lectures |
| Scheduled learning and teaching activities | 6 | Seminars |
| Guided independent study | 124 | Reading, preparation for classes and assessments |
Formative assessment
| Form of assessment | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|
| Practice questions | Taking about 20 minutes each week | 1-17 | Correct answers provided on ELE |
| Guided case studies | Supervised practical case studies, each taking 1-2hours | 1-17 | Feedback during practical classes and suggested solutions provided on ELE |
Summative assessment (% of credit)
| Coursework | Written exams | Practical exams |
|---|---|---|
| 100 | 0 | 0 |
Details of summative assessment
| Form of assessment | % of credit | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|---|
| Individual assignment | 70 | 1,500 words, excluding tables, figures and references | 1-19 | Standard feedback form |
| Group assignment | 30 | 3,000 words, excluding tables, figures and references. | 1-20 | Standard feedback form |
Details of re-assessment (where required by referral or deferral)
| Original form of assessment | Form of re-assessment | ILOs re-assessed | Timescale for re-assessment |
|---|---|---|---|
| Individual assignment | Individual assignment (1500 words) | 1-15, 19 | July/August |
| Group assignment | Individual assignment (1200 words) | 1-20 | July/August |
Indicative learning resources - Basic reading
Benninga, S. (2022) Financial Modeling, 5th edition, Massachusetts: MIT Press.
Indicative learning resources - Web based and electronic resources
To be advised during the course.
Indicative learning resources - Other resources
To be advised during the course.
| Credit value | 15 |
|---|---|
| Module ECTS | 7.5 |
| Module pre-requisites | None |
| Module co-requisites | BEAM047 Fundamentals of Financial Management or BEAM031 Financial Instruments or BEEM061 Fundamentals of Financial Technology (for MSc FinTech students) |
| NQF level (module) | 7 |
| Available as distance learning? | No |
| Origin date | 16/07/2014 |
| Last revision date | 07/05/2024 |
