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Mastering Financial Modeling
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Transcript of Mastering Financial Modeling
Mastering Financial Modeling (MFM©) is a comprehensive financial modeling workshop which covers the
practical requirement that a finance professional is expected to do in areas related to Financial Modeling. Excel
sheet is a predominant tool used in Modeling and the program shall cover its relevant usage in detail. The
workshop has 32 classroom contact hours spanning four days from 8 am to 6 pm. Objective of this program is
to build fundamental concepts on financial modeling and provide them techniques to build financial model
needed by their organisation.
ABOUT THE PROGRAM
MFM©
starts with a 2 day basic program on financial modeling which explains about all the excel based
financial modeling required by finance professional working in any sector. The latter 2 days goes in depth into
the derivative solutions and its analysis and financial engineering models including the concepts of financial
mathematics.
Day 1-2: FINANCIAL MODELING WITH EXCEL (2 Days)
It is a generic program catering to the needs of all corporate professionals working in any sector. This program
will take an individual from basic to an intermediate level.
Pre Requisite: None Day 3-4: MODELING AND ANALYSING DERIVATIVES USING EXCEL (2 Days)
This is a neash financial modeling program which caters to only those working in derivatives and financial
engineering.
Pre-Requisite: It is expected participants should have an understanding of excel based financial modeling and working knowledge of derivatives.
Based on the need, you can enroll for entire 4 day program (MFM©) or for any of the two day program –
Day 1-2: FINANCIAL MODELING WITH EXCEL (2 Days) or Day 3-4: MODELING AND ANALYSING
DERIVATIVES USING EXCEL (2 Days)
HOW THE WORKSHOP WAS SHAPED
Some of the research and data points we have used in shaping the agenda include:
1. Talking to Senior business and Finance management group, Financial consultants and analysts in the private
and public sectors and seeking their views and advice on what are the critical issues in Financial Modeling
and where they are investing budget.
2. Seeking the views of thought leaders, industry analysts and leading consultants to mould the agenda.
3. OptiRisk is in a unique position as a major part of our business is also training - which includes large
portfolio of public and closed in-house courses – from this we track which courses are generating most
participation and importantly again, where organisations are investing budget. Training is an excellent
barometer to market trends.
We believe that this is the most focused of any Financial Modeling workshop in India.
PROGRAM OBJECTIVE
MS Excel ® is today unarguably the most commonly used spreadsheet utility globally to do finance. In spite of
this, according to various surveys on Excel usage, a rather miniscule percentage of Excel Users use it to its full
potential. The focus of the course is to help the participants learn the tools and capabilities of this spreadsheet
application to perform from the simplest to the most complicated and elaborate financial analysis.
Modelling for Corporate Finance Transaction
Case Outline and the process participants will go through in solving the case and structuring an LBO/MBO
transaction
Acquirer input
historical
numbers and
projected
numbers/
assumptions.
Acquirer
output:
Income
statement,
balance sheet
and cash flow
Acquirer
DCF valuation
output
How the
LBO/MBO
would be
funded. How
much debt
needs to be
raised
Structuring the
Deal
Evaluating
Different
Options
Motivations &
Economics of
deal for
Debt/Hybrid/E
quity Investors
Sources of
Funds:
Financial
Sponsors
Management
Different Tiers
of debt
Also Attend:
Modeling & Analysing Derivatives Using Excel
–(From the same faculty)
Mumbai – 6th & 7
th October, 2010
Program Fee: INR 13,000/- + ST
The good thing about an over-engineered software like Excel is that it very well equiped to perform the most
sophisticated and detailed financial analysis. The downside to this is that financial analysis workbooks are
becoming increasingly bulky and unstructured. Many a times, they develop into unweildy, clumsy and difficult
to manage models, with the user having no clue as to what’s going in the spreadsheet and if the results are
accurate in the first place. Therefore, structuring good financial models is as much an art as a science.
The important aspects this workshop focuses on is to apply the tools effectively while constructing financial
models, caring for scalability, making them flexibile, structuring in such a way that auditing the model results is
not cumbersome. These essential attributes make financial models accurate, flexible and user-friendly. The
workshop would use a ‘learning by doing’ approach, because that’s how the science and art of financial
modeling is learnt.
Results:
We expect that the participants attending the course will be able to learn significant financial modeling
capabilities using Excel that would be pertinent for corporate finance, financial analysis, risk management,
transaction structuring like modeling for M&A, etc. The level of the course is Intermediate to advanced.
KEY BENEFITS
- Master the use of Excel’s financial modelling tools
and capabilities
- How to design a model to suit your purpose
- Understand the different types of financial models
and when each should be applied
- Construct financial models making use of a broad
range of Excel methods and techniques
- Accurate forecasting corporate cash flows for project
finance deals and structures
- Incorporate elements such as risk, sensitivity,
optimisation and forecasting into financial models
- Produce meaningful management reports and charts
for communication
- How to identify and control key sensitivities through
advanced spreadsheet simulation
- How to design a model to maximise flexibility and
reliability
- Practical tips for checking and debugging the mode
Session One:
Creating the first financial statement model in Excel to
begin with (with an exercise and hands on practical
session; focus on how to build a model right from the
scratch, linkages with excel spread sheets, assumptions,
use of past financial statements for the projections and
building forecasted financial statements)
Important issues for preparation and building of a financial
model
Excel Functions and commands to supercharge worksheets
(most of the participants may be aware about the
functions, yet just a quick revision and how these functions
are used in financial modelling)
Different ways of summing and counting: SUMIF;
SUMIFS; SUMPRODUCT; DSUM; DCOUNT;
DCOUNTA; COUNTBLANK; COUNTIF; DMAX;
DAVERAGE
IF (This Is True, Do This, Else Do This)
Lookup & reference: CHOOSE; OFFSET; INDEX;
MATCH; HLOOKUP; VLOOKUP
Data Analysis Toolpak
Important Excel Functions and commands for
modeling
Conditional Formating
Online collaboration
Auditing
Protecting the workbook
Sharing the workbook
Data Validation
Handling external data
Sorting
Filters
Subtotals
Pivot Tables
Session Two:
Statistical Data Analysis: trend analysis, regression,
moving average
Optimisation using
Goal Seek
Scenario Manager
Data Table: Row and Column input cell
Solver
PROGRAM FACULTY
Our faculty is an experienced Investment Banker and a guest faculty in finance in IIMs, who specializes in Fixed
Income, Foreign Exchange and Credit Derivative products. We has conducted training programs for banks and
corporates in India, Singapore, Hong Kong, Middle East, and South Africa on topics such as Credit Derivatives,
Fx Derivatives, FI Derivatives, ALM, M&A, Financial Modeling for LBOs, Debt Capital Markets, Basel II and Risk
Management.
WHO SHOULD ATTENTD
Corporate Finance Professionals
Quantitative analysts
Investment Bankers
Risk professionals
Treasury managers
Controllers
Data analysts and economists
DAY ONE
DAY ONE (Cont.)
Scenario Building
Switches
Forms
Scenario building optimistic, base case and pessimistic assumptions
DAY TWO
Session Three : Topics in Finance
Principles of financial modelling—Accuracy, Flexibility
& User-friendliness
Defining Model objective
Outlining model plan
Spread sheet maps
Flowchart and information flow
Layout and architecture of financial model
Setting up modules
Identifying inputs and variables
Defining deliverables and functionality
Cataloguing outputs
Stress testing Models
Model Documentation
Financial Statement modelling
Projection of Revenues, COGS, SG&A and other Income
Statement and Balance Sheet items
Select model drivers and assumptions
How to create an interlinked model for Income
Statement and Balance Sheet
How circularity improves accuracy but also destabilizes
the model
Building a fully integrated Cash Flow Statement
Modelling need for financing in future time
Analysing the output and cross-checking with surplus
funds and necessary to finance
Models for Debt repayment with prepayment option
Modelling Amortizing & Accreting Loans
Modelling Pay In Kind (PIK) securities
Model for computing Beta
Modelling un-levering and re-levering of betas
Modelling term structure of Beta
Model for WaCC with various debt-equity choices
Modelling term structure of WaCC
DCF valuation
Relative valuation (PE, EBITDA multiple)
Combining DCF and relative valuation models
Modelling for Leveraged Buy Out & Management Buy
Out
Sources of funds for acquisition
Modelling uses of funds
Modelling ESOPs and Earn-Outs
Partial and full dilution due to ESOPs
IRR calculation for financial sponsor on fully diluted
basis
Purchase Accounting Model
Model for Stock-for-Stock Deal
Model for Cash-for-Stock Deal
Modelling when M&A financed by issue of debt
Model illustrating Accounting for a partial Acquisition
Accretion Dilution Model
Deal Structure: Cash, Fixed-Value Stock Offer, Fixed-
Shares Stock Offer
PROGRAM OBJECTIVE
A common misconception is that understanding derivatives requires knowing a lot of advanced math
which is the privilege of only the geeks. That said, sometimes you probably wonder how do these large bunch of
I-Bankers manage to provide derivative solutions to their clients because they don’t seem to have been rocket
scientists in their previous avatar. There would have also been questions like how do you actually engineer
those financial products? May be, you read something called Black Scholes, Ito’s Lemma, and so on but they
didn’t quite answer those questions convincingly, much less, make sense in the context of the real world of
finance.
In the last two decades, derivatives have become all-pervading in financial markets with outstanding
notionals in excess of US$ 600 trillion. If your profession has anything to do with finance, then there is a pretty
high chance that you will have something to do with derivatives at some point or the other. This course tries to
demystify and simplify derivatives using a tool like Excel. For a practioner, it may be difficult to relate the Black-
Scholes equation but it would probably start to make sense once you start thinking like an accountant about all
these greeks and put the differential equations in excel. In the workshop, we will start to think of each of these
greeks in terms of money, which is what traders do. The program covers a comprehensive list of topics that
derivative practioners need to understand for their day-to-day work.
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Also Attend:
Financial Modeling With Excel
–(From the same faculty)
Mumbai – 4th & 5
th October, 2010
Program Fee: INR 13,000/- + ST
Understand financial engineering specifically, how
derivative structures are engineered
Pricing and risk management of Equity, FX, Interest
Rate and Credit Derivatives
Demystify and simplify the quantitative techniques in
analysing derivatives using Excel
Be aware of derivatives as risk management tools
Learn how to manage a derivative portfolio
Appreciate how derivatives are structured to suit
client requirements
Learn simulation techniques for pricing derivatives
Learn how to solve any stochastic partial deferential
equation (including Black Scholes equation) using
spreadsheets
Understand Greeks (Delta, Gamma, Vega & Theta)
and the monetary implications of each of them
PROGRAM FACULTY
Our faculty is an experienced Investment Banker and a guest faculty in finance in IIMs, who specializes in Fixed
Income, Foreign Exchange and Credit Derivative products. We has conducted training programs for banks and
corporates in India, Singapore, Hong Kong, Middle East, and South Africa on topics such as Credit Derivatives,
Fx Derivatives, FI Derivatives, ALM, M&A, Financial Modeling for LBOs, Debt Capital Markets, Basel II and Risk
Management.
WHO SHOULD ATTENTD
Capital Market Professionals
Quantitative analysts
Investment Bankers
Risk professionals
Treasury managers
Controllers
Economists
KEY BENEFITS
DAY ONE
Session One:
Geometric Brownian Motion
Financial variables with deterministic Jump and
stochastic jumps
Taylor series
Our first differential equation
Binomial Model
Binomial model for an asset price random walk
delta hedging
no arbitrage
the basics of the binomial method for valuing options
risk neutrality
Pricing exercises using Binomial model
Simulating and Manipulating Stochastic Differential
Equations
Using Ito’s lemma to manipulate stochastic
differential equations
Continuous-time stochastic differential equations as
discrete time processes
Simple ways of generating random numbers in Excel
Correlated random walks
Monte Carlo Simulation and Related Methods
the relationship between option values and
expectations
how to do Monte Carlo simulations to calculate
derivative prices
simulations in many dimensions using Cholesky
factorization
The Black–Scholes Model
the foundations of derivatives theory: delta hedging
and no arbitrage
multiple ways of deriving the Black–Scholes partial
differential equation
the assumptions that go into the Black–Scholes
equation
how to modify the equation for commodity and
currency options
Session Two:
Replication of price of a derivative product in general
is the cost of risk managing it
Excel Exercise using a Partial Differential Equation
Discrete Hedging
the effect of hedging at discrete times
hedging error
the real distribution of profit and loss
Pricing exercises
Equity Derivative Products
Vanilla Options
Call/Put Options
Contract specifications of Call/Put Options
Exercise: Pricing with Black Scholes Model and
Monte Carlo Simulation in Excel
Basic strategies containing vanilla options
Call and put spread
Risk reversal
Risk reversal flip
Straddle
Strangle
Butterfly
Seagull
DAY TWO
Session Three: Fx Derivatives and Interest Rate Derivatives
Fx Forwards, Fx Swaps
When to use an FX forward, Fx Swap
Pricing & Hedging Examples
Fx Structuring Exercise in Excel: Corporate Client
Fx Structuring Exercise: Cross border acquisition
Interest Rate Swaps
LIBOR Swaps
MIBOR Swaps
OIS Swaps
Basis Swaps
Cross Currency Swaps
Standard CCS with principal exchange
PO Swaps
CO Swaps
Interest Rate Options
Receiver and Payer Swaptions
Caps and Floors
Callable & Puttable Bonds
CO Swaps
Interest Rate Options
Receiver and Payer Swaptions
Caps and Floors
Callable & Puttable Bonds
Session Four:
Credit Derivatives
Credit Default Swap Pricing
Pricing First-to-default Basket
Copula Models for pricing credit derivatives: Gaussian
Copula
Pricing CDO
Risk management of Derivatives
Value at Risk
VAR as Downside Risk
VAR Parameters: Confidence Level, Horizon,
Application: The Basel Rules
VAR Methods
Counterparty Credit Risk for Derivative Transactions
Counterparty-level exposure
Credit Value Adjustment (CVA)
CVA as the price of counterparty credit risk
Expected Exposure - Conditional on Default
Peak Exposure - Conditional on Default
Wrong/Right-Way Risk
Booking terms and conditions
The registration fee for the event covers the
following : Attendance, copy of documenta-
tion, lunches and light refreshments. Accom-modation is not included. Detailed delegate
information will be sent to you approximately
two weeks before the event. Payment is required in advance of the event, or at the
latest, paid at the event. Payment may be
made by par cheque or demand draft if favour of “OPTIRISK LEARNING SYSTEM
(P) Ltd.” payable at Chennai.
exclusive jurisdiction of whose court the parties hereby agree to submit.
Confirm your CANCELLATION in writing up
to 15 working days before the event and
receive a refund less a 10% service charge. Regrettably, no refunds can be made for
cancellations received less than 15 working
days prior to the event. However, SUBSTITU-TIONS are welcome at any time.
The organizers reserve the right to amend the
programme if necessary.
INDEMNITY : Should for any reason outside the control of OptiRisk Learning Systems (P)
ltd (hereafter called OptiRisk), the venue or
the speakers change, or the event be can-celled due to industrial action, adverse
weather conditions, or an act of terrorism,
OptiRisk will endeavour to reschedule, but the client hereby indemnifies and holds
OptiRisk harmless from and against any and
all costs, damages and expenses, including attorneys fees, which are incurred by the
client. The construction validity and perform-
ance of this Agreement shall be governed by
all aspect by the laws of India to the
Registration form
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2.Telephone +91 9094532918 +91 44-45018472
3.Fill this and post OptiRisk Learning Systems (P) Ltd. L468, Ground Floor, 21st Cross Street, Thiruvalluvar Nagar, Thiruvanmiyur, Chennai - 600041
Excel (2 Days)Modeling & Analysing Derivatives Using
Rs 24,000/(Certificate of Participation from Carisma Brunel University London)
Both (4 Days) 4th - 7th October, 2010 - Mumbai
(2 Days)
6th & 7th October, 2010 - Mumbai
4th & 5th October, 2010 - MumbaiWith ExcelFinancial Modeling Rs 13,000/
Yes, please register me for : Fees
-*(Service Tax Applicable)
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About Unicom OptiRisk India Learning Solutions:
The mission of OptiRisk India Learning Solutions is to be a niche
knowledge provider in Finance, Energy, IT, Infrastructure and Risk
Management domain.
Areas of Expertise
Management
Industries Serviced
Centre for the Analysis of Risk and Optimisation Modelling
Applications
CARISMA: The Centre for the Analysis of Risk and Optimisation
Modelling Applications is an interdisciplinary research centre which
is supported by the strategic research initiative of Brunel University.
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