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Financial Modelling

Module description

This module is intended for Financial Services Professional Degree Apprenticeship students who want to develop the knowledge and tools to implement financial models using Excel.

This is an applied module that covers the implementation of quantitative financial models widely used in financial institutions such as investment banks, mutual funds and hedge funds, and non-financial corporations.

The module covers various topics in finance drawn from investment analysis, corporate finance, fixed-income analysis, risk management and international finance. The module’s emphasis is on the practical application of finance theory, in which you will work through real-world problems using Excel.

Module aims - intentions of the module

This module aims to equip you with the knowledge and tools to implement financial models using Excel. The course introduces you to the general principles of building financial models, as well as several specific financial modelling tools, including regression analysis, statistical functions, matrix functions, optimisation and simulation. These methods are applied to a range of practical problems in finance, including financial statement modelling, yield curve modelling, risk management and exchange rate modelling. The course’s emphasis is on the practical application of the theory, with lectures on each topic followed by in-depth practical sessions in which you will work through real-world problems using Excel. The module will also introduce you to using VBA (Microsoft’s programming language) in financial modelling.

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 and currencies.
• 3. Undertake a range of financial and statistical calculations in Excel.
• 4. Estimate the cost of capital for a company.
• 5. Build a financial statement model and use this to estimate the fair value of a company.
• 6. Estimate the expected yield of a corporate bond and construct a yield curve.
• 7. Evaluate the risk of an investment portfolio.

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 8. Effectively undertake complex financial modelling and research, and analysis using appropriate tools.
• 9. Design a range of different trading strategies and test their effectiveness.

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 10. Develop proficiency in the relevant IT skills (Excel) and Financial Service specific software/systems, as required to deliver the role outcomes.
• 11. Demonstrate a good understanding of processes and portfolio management principles and how they are utilised within your area.
• 12. Adapt your approach positively to manage priorities as circumstances change, new tasks need to be done or when business requirements change.

Syllabus plan

• Introduction to Excel functions
• Financial modelling using balance sheets
• Corporate finance and valuation (computations of enterprise value and WACC)
• Yield curve modelling
• Portfolio models (Computing efficient portfolios and various statistics with the use of Monte Carlo methods)

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Re-assessment notes

Deferral – if you miss an assessment for certificated reasons judged acceptable by the Mitigation Committee, you will normally be either deferred in the assessment or an extension may be granted. The mark given for a re-assessment taken as a result of deferral will not be capped and will be treated as it would be if it were your first attempt at the assessment.

Referral – if you have failed the module overall (i.e. a final overall module mark of less than 40%) you will be required to submit a further assessment. If you are successful on referral, your overall module mark will be capped at 40%.

Indicative learning resources - Basic reading

• Benninga, S. (2014) Financial Modelling, 4th edition, Massachusetts: MIT Press.
• Hands-On Financial Modeling with Excel for Microsoft 365 - Second Edition by Shmuel
• Investment Banking: Valuation, LBOs, M&A, and IPOs (3rd ed.), Rosenbaum, J., Pearl, J., Perella, J. R.  

Key words search

Financial Modelling