Financial Modeling [With CDROM]

by Simon Z. Benninga

Book Overview

The third edition of this standard text retains the popular 'cookbook' features of the earlier editions and includes expanded and new coverage of such topics as bank valuation, the Black-Litterman portfolio selection model, Monte Carlo pricing methods, array function, and getting information from the Internet with VBA.

• Format: Hardcover
• Language: English
• ISBN: 0262026287
• ISBN13: 9780262026284
• Release Date: January 2008
• Publisher: MIT Press (MA)
• Length: 1133 Pages
• Weight: 3.98 lbs.
• Dimensions: 1.9" x 7.3" x 9.3"
• Age Range: 18 years and up
• Grade Range: Postsecondary and higher

Customer Reviews

Chicken Soup for the Financial Analyst's Soul

If you need to build a working valuation model, calculate the risk of a portfolio with 100+ securities, or figure out what return you might expect to get from a portfolio of high-yield bonds, then you'll find Simon Beninga's "Financial Modeling" merits far more than five stars: this is one book that is indispensable.One of the biggest problems I ran into during my MBA program was the way my professors taught Corporate Finance. I had great profs, true, but they were teaching theoretical concepts from theoretical textbooks. Sure, you learned the basics: CAPM, net present value, basic options and futures, Arbitrage Pricing Theory, VAR and TEV, but I have always maintained that the best way of learning a subject---particularly corporate finance---is by getting your hands dirty and digging into the guts of the material. Since Corporate Finance, off-balance sheet instruments aside, isn't very dirty, the best way to get a hands-on practical approach in terms of Capital Structure, the appropriate discount rate to use in pricing an asset, risk, and optimal debt and dividends is to program in Excel and Visual Basic. The problem is that many top finance texts don't offer supplemental material to translate the theoretical concepts into actual valuation and spreadsheet models, which any financial analyst will contend is the life-blood of the industry. With that in mind, Simon Beninga's "Financial Modelling" is a kind of "Joy of Cooking" for initiate investment bankers, corporate financiers, controllers, analysts, and anyone who wants to use core Corporate Finance concepts in the real world. Beninga goes through the standard laundry list of Corporate Finance text topics---from the optimal risky portfolio to the term structure of interest rates---and shows you how to translate these concepts into workable spreadsheet models that can illustrate, illuminate, and get to the heart of a problem. If you're a new MBA or financial analyst, you'll find much to love in Beninga's approach, and by pairing the newly expanded 2nd edition up with a top theoretical finance textbook (Ross, Westerfield et al.'s "Corporate Finance" is a fine example) you'll get the most out of your MBA program and have a solid foundation for building Excel and Visual Basic financial models that work. I liken "Financial Modeling" to a cookbook, in that Beninga provides all the ingredients necessary to the model at hand: he begins with a sprinkling of theory, whether it's modeling a bond portfolio's immunization, calculating the cost of capital, estimating a portfolio's Beta with no short-selling, or pricing put and call options using both the binomial theorem and Black-Scholes. His writing is spare, terse, and to the point, but I have learned more about advanced corporate finance theory through Beninga's marvellously pithy writing and copious Excel examples than I have in reading ten 'top of the list' finance books. In addition to nicely expanded sections on options (including portfolio insurance)

Very Good - MBA Students This Is a Must Own

This is a very good book in showing the reader how to utilize and manipulate Excel for financial problem solving and modeling applications. If you are looking for a book that will show you how to build a leverage buy-out or m & a model from scratch, your expectations are way too high. What this book shows you is how to build those types of models by showing you how to model and use various Excel functions to build the various subsections of those types of complicated models and link them all together. I highly recommend this book to MBA students who are career changers and are looking to enter corporate finance or consulting careers where quantative Excel usage is part of the job. This book shows you how to get the most out of Excel, which is a very user friendly software package. The book comes with a CD-ROM which has examples as utilized in the book and homework problems which are good and can be somewhat hard which forces you to learn Excel for financial applications. If you are a quick learner and highly motivated, you will get a lot out of this book. Nothing is to be feared. It is all to be mastered. By buying this book and working out the Excel problems and exercises on my own, my confidence level with Excel and my own modeling skills has shot up. Given what I have learned from this book, i consider the price to be a bargain. This is very much a learning by doing book. You will get a lot out of it.

Excellent book due to its simple practicality

I highly recommend this book to any aspiring financial analyst. It is definitely worth it, even at the list price.Want to master the fundamentals of basic finance using Excel? then this is one of the few books on the market that really meet this need. Want to set up more advanced mathmatics modeling? well as the introduction of this explains, this book is more like a cookbook: it lists the required basic ingredients and the culinary process but if you want to spice the dish (financial model) up, it is up to the individuals to dig out those advanced formulas from the financial trade journals and apply them to the models.I first saw the first edition of this book in my college library. took it home and was EXCITED. I was looking for a practical book that would show me the intricacies of Excel for setting up financial models and this was like a god-sent. Like one of the other reviewers said, this book combined basic finance, Excel functions, and VBA programming. To add practicality to this book, Professor Benninga even showed how to download financial data from the internet. Granted it is rather basic, but it adds to the usability of his book, making it a well-round book.The best parts are end-of-the chapter exercises. Solutions are provided in the accompanying CD-ROM. See how many ways can you solve the same problem.Professor Benninga always outlines the assumptions and explains the parameters of each model. We should remember that in many instances, unrealistic assumptions lead to way-of-the mark numbers, rendering the whole modeling process and its calculations useless.Want to become a advanced-level financial modeler? then master the fundamentals first! this book gets you started.P.S. I also highly recommend to anyone just starting with Excel modeling to read William J. Orvis's Excel for Scientists and Engineers. It is a bit outdated but still highly useful for its chapters on curve fitting, VBA programming and raw data manipulation.

Real World Financial Modelling

Finally a book for the Finance Specialist using Excel. Fantastic explanation of every step, starting at the very beginning of each topic.I Corporate Finance Models Basic Financial Calculations, Calculation of Cost of Capital, Financial Statement Modeling, Using Financial Statement Models for Valuation, The Financial Analysis of Leasing, The Financial Analysis of Leveraged Leases. Great basics from which you can build your own models, improvements etc.II Portfolio Models Calculating the Variance-Covariance Matrix, No Short Sale Restriction, Estimating Beta & SML, Short Sale Restriction, VAR. Basic topics in PM, and less used on Excel in the professional world. But, very exciting to gain thorough understanding by doing it on Excel.III Option Pricing Models My topic. Binomial Model, LogNorm Distribution, B & S Model, Portfolio Insurance, Real Options, Early Excercising. Again, great excerise to do it on Excel for learning purposes. Nice intro on Real Options using Binomial Model, but not my beloved B & S.IV Bonds and Duration Duration, Immunisation, Modelling the Term Structure, Calculating Default expec.adj. Bond Returns, Cheapest to Deliver. Cannot comment to this topic.V Technical Considerations Random Numbers, Data Tables, Matrices, The Gauss-Seidel Method, Excel Functions, Some Excel Hints. Matrices explained on Excel! Never seen that before. The rest almost replaces a single Excel Handbook.VI Introduction to Visual Basic for ApplicationsUser-defined Functions with VBA for Applications, Types and Loops, Macros and User Interaction, Arrays, Objects. The basics of VBA that help you to master many VBA problems.Fantastic work Simon Benninga!Check: http://finance.wharton.upenn.edu/~benninga/home.html

Extraordinarily useful book! No errors!

I recently got Benninga's book on financial modeling. I think it is a great book! For once, someone has taken the time to write a book that takes financial theory out of the classroom and follows it directly in a simple path to useful applications. Unfortunately all too many academic authors fail to take their work the final step and thus much of it can never be fully applied.I went through many of the exercises and did not find any errors or mistakes. I suspect that those readers commenting on mistakes lack certain basic Excel skills (necessary for this book).If you're interested in financial modeling, or want to sharpen your finance skills, this is the book to get.