Financial Modelling

Module description


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.
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.

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
Module code:BEAM046
Module level:M
Academic year:2016/7
Module lecturers:
  • Professor Richard Harris - Convenor
  • Dr Jane Shen - Lecturer
Module credit:15
ECTS value:





BEAM047 Fundamentals of Financial Management

Duration of module: Duration (weeks) - term 1:


Module aims

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 the calculation of present and
future value, matrix calculations, optimisation, regression analysis, maximum likelihood estimation 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 ActivitiesGuided independent studyPlacement / study abroad

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Contact Hours16Lectures
Contact Hours12Practical classes

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Weekly online quizzesEight quizzes, each taking about 20 minutes to complete1-20Correct answers provided on ELE
Bi-weekly guided case studiesFour supervised practical case studies each lasting three hours1-22Feedback during practical classes and suggested solutions provided on ELE
Bi-weekly self-study case studiesFour unsupervised practical case studies, each taking about three hours to complete1-22Suggested solutions provided on ELE

Summative assessment (% of credit)

CourseworkWritten examsPractical exams

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Individual computer based test 50one hour1-20Correct answers provided on ELE
Group written assignment (five students per group)504000 words, excluding tables, figures and references. 1-24Feedback provided on ELE

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

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Individual testIndividual assignment (800 words)1-23July
Group assignmentIndividual assignment (1200 words)1-23July

Syllabus plan

  • Introduction
  • 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, 4d edition, Massachusetts: MIT Press.

Module has an active ELE page?


Indicative learning resources - Web based and electronic resources

ELE, various financial websites to be advised during the course.

Indicative learning resources - Other resources

to be advised during the course

Origin date


Last revision date