This module equips you with the knowledge and tools to implement financial models using Excel and Visual Basic for Applications (VBA). 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 and VBA.
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.
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. The international aspects of finance are explicitly addressed through the modelling of exchange rates.
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.
Full module specification
|Module title:||Financial Modelling|
BEAM047 Fundamentals of Financial Management
|Duration of module:||
Duration (weeks) - term 1: |
The aim of this module is to equip students with the knowledge and tools to implement financial models using Excel and VBA. 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 passive and active portfolio management, performance measurement, 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 classes, in which students work through real world problems using Excel and VBA.
ILO: Module-specific skills
- 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. estimate the cost of capital for a company
- 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. undertake a style analysis of a portfolio and evaluate its performance
- 9. construct a yield curve
- 10. evaluate the risk of an investment portfolio
- 11. estimate the fair value of a currency
- 12. implement currency trading strategies based on momentum, carry and fair value
ILO: Discipline-specific skills
- 13. evaluate the characteristics of financial data and their statistical properties
- 14. explain the principles of passive and active portfolio management
- 15. estimate corporate and Treasury bond yields and yield curves
- 16. use simulation to model the unknown distribution of financial security returns
- 17. design a range of different trading strategies and test their effectiveness
- 18. explain the principles of portfolio performance in terms of risk and return
- 19. evaluate the characteristics and dynamic properties of the volatility of financial assets
ILO: Personal and key skills
- 20. solve applied problems using Excel
- 21. download and manipulate complex data
- 22. plan and undertake independent research
- 23. present your research in a professional manner
- 24. work effectively in teams
Learning activities and teaching methods (given in hours of study time)
|Scheduled Learning and Teaching Activities||Guided independent study||Placement / study abroad|
Details of learning activities and teaching methods
|Category||Hours of study time||Description|
|Contact Hours||16||Practical classes|
|Form of assessment||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Weekly online quizzes||Eight quizzes, each taking about 20 minutes to complete||1-20||Correct answers provided on ELE|
|Bi-weekly guided case studies||Eight supervised practical case studies each lasting two hours||1-22||Feedback during practical classes and suggested solutions provided on ELE|
Summative assessment (% of credit)
|Coursework||Written exams||Practical exams|
Details of summative assessment
|Form of assessment||% of credit||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Individual test||50||one hour||1-20||Correct answers provided on ELE|
|Group written assignment (five students per group)||40||4000 words, excluding tables, figures and references.||1-24||Standard feedback form|
|Peer evaluation of group assignment||10||Evaluation form on ELE||1-24||Peer evaluation scores and comments provided on ELE|
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 test||Individual assignment (800 words)||1-23||July|
|Group assignment||Individual assignment (1200 words)||1-23||July|
- Portfolio Optimisation
- Portfolio Management
- Performance Measurement
- Risk Management
- Volatility Forecasting
- Modelling the Yield Curve
- Exchange Rate Modelling
Indicative learning resources - Basic reading
Benninga, S. (2014 Financial Modelling, 4th edition, Massachusetts: MIT Press.
CFA ® Level I Curriculum set
Module has an active ELE page?
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.
Last revision date