“certified financial modeler” · module aims of the des certificate course “certified...

Module Manual

for the certificate course

“Certified Financial Modeler”

German Institute for Corporate Finance (GICF)

Preface ........................................................................................................................................ 2

Qualification targets of the certificate course “Certified Financial Modeler” .................................. 2

Curriculum and Electives of the certificate course “Certified Financial Modeler” ............................ 5

Module descriptions for the certificate course “Certified Financial Modeler“ ................................. 6

Modulhandbuch des Zertifikatslehrgangs „Certified Financial Modeler“

Preface

The module manual is the authoritative document which presents the contents and structure of the certificate course “Certified Financial Modeler”. It provides orientation in the course and lists

• the qualification targets of the certificate course “Certified Financial Modeler”,

• the module aims of the certificate course “Certified Financial Modeler”,

• the curriculum and electives of the certificate course “Certified Financial Modeler”,

• and the module descriptions of the certificate course “Certified Financial Modeler”.

Qualification targets of the certificate course “Certified Financial Modeler”

Aims of the course Overarching aim of the certificate course "Certified Financial Modeler" is the optimal preparation of the participants by providing financial modeling competencies which can be used for solving specialized tasks and for preparing and making decisions at the international level in the field of finance. An additional aim of the certificate course "Certified Financial Modeler" is to lay the foundations for further academic growth of the participants by providing specialized knowledge in the field of financial modeling. The participants achieve this overarching aim of the course by successfully working on the following sub-goals: Graduates of the certificate course "Certified Financial Modeler" are able to:

1. recognize the complexity of structures and processes of financial decisions from the perspective of "Financial Modeling", assess them appropriately, adjust them to market changes and provide strategic justifications for decisions.

2. analyze complex problems of "Financial Modeling" in an interdisciplinary fashion, recognize and optimize possible adjustment tools, and if needed develop solutions independently.

3. implement quantitative methods of "Financial Modeling" to solve concrete issues and to reach decisions in a targeted manner.

4. critically reflect on their own behavioral patterns and to use creativity and flexibility in reaction to changing framework conditions and to deal with opportunities and risks in a constructive manner.

5. work independently on a scientific topic and as a next step in their academic career deepen their knowledge of "Financial Modeling" in a master thesis or possibly in a Ph.D. thesis.

In line with these aims, the certificate course trains talented and committed participants from home and abroad to become executives in the financial industry that can work internationally, are comprehensively educated, think independently and act with competence.

Module aims of the des certificate course “Certified Financial Modeler” with reference to the aims of the course

Certified Financial Modeler I.1: Financial Modeling Standards The course participants are able to independently and creatively work on an applied topic from the field of international finance using methods of Financial Modeling while incorporating interdisciplinary approaches. They organize and solve the problems which occur in the process at the factual and interpersonal level in a constructive manner. Reference to the aims of the course: 1, 2, 3, 4, 5 Certified Financial Modeler I.2: Model Review The course participants are able to independently and creatively work on an applied topic from the field of international finance using methods of Financial Modeling while incorporating interdisciplinary approaches. They organize and solve the problems which occur in the process at the factual and interpersonal level in a constructive manner. Reference to the aims of the course: 1, 2, 3, 4, 5 Certified Financial Modeler 1.3: Financial Modeling with Excel The participants are able to analyze quantitative financial issues and questions with the help of theories and models and to identify the relevant influencing factors. For this purpose, they select and apply suitable IT tools on the basis of statistical and mathematical models. When developing these suitable solution strategies they base their work on the responsible interpretation of the results. Reference to the aims of the course: 1, 2, 3, 4 Certified Financial Modeler 1.4: Financial Modeling with VBA The participants are able to analyze quantitative financial issues and questions with the help of theories and models and to identify the relevant influencing factors. For this purpose, they select and apply suitable IT tools on the basis of statistical and mathematical models. When developing these suitable solution strategies they base their work on the responsible interpretation of the results. Reference to the aims of the course: 1, 2, 3, 4 Certified Financial Modeler II.1: Financial Management The participants are familiar with the instruments of external and internal financing. They are able to assess the process a corporation must complete when it adds equity and debt capital. In doing this, they incorporate the challenges of the capital markets and are able to develop strategies and to convey these strategies in a way that is appropriate for their audiences. Reference to the aims of the course: 1, 2, 3, 4, 5 Certified Financial Modeler II.2: Corporate Finance The participants are aware of the importance of corporate valuation in the context of other topics in corporate finance. They connect their knowledge of financial economics and their abilities to apply them in corporate valuation. They are able to interpret the results of the corporate valuation and can independently draw conclusions concerning corporate finance transactions. Reference to the aims of the course: 1, 2, 3, 4, 5 Certified Financial Modeler II.3: Portfolio Management The participants are able to analyze the basic methods of financing and to critically assess the assumptions of financial models. They calculate risk and return and are able to check them with the help of statistical tests. In addition they are able to analyze risk structures and to optimize existing portfolios. Reference to the aims of the course: 1, 2, 3, 4, 5


Certified Financial Modeler II.4: Derivatives The participants are able to analyze derivatives with the help of relevant theories and mathematical models. They are furthermore able to apply the concept of risk-neutral valuation. They are in a position to independently structure and value financial products. They apply different concepts in order to develop innovative solutions for pricing, hedging and trading of financial derivatives. Reference to the aims of the course: 1, 2, 3, 4, 5

Curriculum and Electives of the certificate course “Certified Financial Modeler”

Module Number

Module Name

Module ElementNumber

Module Element

ECTS

I Foundations of Financial Modeling

I.1 Financial Modeling Standards 2.5


I.2 Model Review 2.5


I.3 Financial Modeling with Excel 2.5


I.4 Financial Modeling with VBA 2.5

II Applied Financial Modeling

II.1 Financial Management 5


II.2 Corporate Finance 5


II.3 Portfolio Management 5


II.4 Derivatives 5

III Financial Modeling Project

III Financial Modeling Project 10

All four module elements (1. Standards 2. Model Review 3. Excel 4. VBA) within Module 1 are relevant for the exam. Participants can choose from four of the following electives within Module 2: 5. Investing and Financing 6. Corporate Finance 7. Portfolio Management 8. Derivatives. Participants have to choose three out of four electives for the exam.


Module descriptions for the certificate course “Certified Financial Modeler“

Module I

Module name Foundations of Financial Modeling

Contribution of the module to the study targets

Qualifications targeted

Contents and methods:

The students are able to:

describe the standards of financial modeling in their own words.

analyze a topic in finance using the tools of financial modeling and to present an objective assessment concerning appropriate solutions to the problem with the help of financial modeling.

structure a problem in finance with the help of financial Modeling and utilize different Excel functions and VBA functions in the process.

solve unfamiliar problems in finance with the help of financial modeling instruments.

combine different aspects of finance in order to develop individual solutions.

reach decisions within a limited timeframe that are based on scientific methods.

evaluate financial models that were developed in-house or by third parties.

Contens

Financial Modeling Standards

Model Review

Financial Modeling with Excel

Financial Modeling with VBA

Requirements for participation

Knowledge, Abilities, Competencies

none

Preparation for the module

Reading of the literature listed in the module elements

Type of module

Required module

Level of the module

EQR 7

Module use

Link with other modules of the course of study

Financial Management

Corporate Finance

Portfolio Management

Derivatives

Financial Modeling Project

Language of the study materials and the exam


German or English

Required examinations (Prerequisites for awarding ECTS)

Type and duration (min) Share %

Exam 180 100%

The examination consists of 220 test questions. The Module 1 Exam includes 4 submodules, of which all should be answered. It is not possible to pick and choose which submodules are to be answered. Each submodule has 55 questions including 24 multiple choice questions, 24 single choice questions and 7 fill in the blank questions with a maximum of 186 total possible points to earn per submodule. A total of 744 points can be earned in the Module 1 Exam. The exam is considered passed when at least 139 points have been earned in each submodule (75% of total possible points per submodule).


Number of ECTS-Credits awarded 10 ECTS


Module Element I.1

Title of the module element Financial Modeling Standards

Structure

Qualifications targeted With regard to the qualification category of knowledge and understanding, the course participants are able to:

describe how models capture reality and explain the significance of the holistic approach to financial modeling in the academic world and in applied work.

provide an overview of the status quo in financial modeling in the literature and in applied business practice and to compare the different approaches.

reproduce the financial modeling standards and to differentiate them from other approaches in the literature.

relate the financial modeling standards to other modules such as financial management, corporate finance, portfolio management and derivatives.

With regard to the qualification category of abilities, the course participants are able to:

significantly reduce sources of errors in financial models by implementing the financial modeling standards.

use the knowledge of financial modeling standards and apply it when creating models.

acquire the necessary tools to apply the financial modeling standards to specific financial questions in the specific working area of the course participants.

independently structure complex modeling tasks by applying the financial modeling standards and to develop unique models suitable to solve these tasks.

critically assess in-house and outside models based on the financial modeling standards and to point out deviations from the standards.

interpret the results of the application of the financial modeling standards and to independently draw conclusions about the optimization of the model.

With regard to the qualification category of competencies, the course participants are able to:

apply the financial modeling standards to other modules such as financial management, corporate finance, portfolio management and derivatives and to utilize them in this context.

manage a project with the aim of creating a financial model and to develop independent solutions among a group of modeling specialists.

independently develop financial models while incorporating financial modeling standards and to critically evaluate the results.

create a transparent and complete documentation as part of the model development, which is in line with the financial modeling standards.

present and defend the results of the financial modeling process against the background of the financial modeling standards in front of customers.

Knowledge Understanding Abilities Competences

Subject

System

Self

Social

1. Foundations of Financial Modeling 1.1 What are Models and what is Financial Modeling? 1.2 Analyzing the Model Requirements and Defining a Task List 1.3 Structuring Financial Models in Modules 2 Current State of Financial Modeling in Theory and Applied Work 2.1 Literature on Financial Modeling 2.2 Different Approaches – Identical Aims 3 Financial Modeling Standards 3.1 Top-10 Financial Modeling Standards 3.2 150 Financial Modeling Standards 3.2.1 Definition of the Problem 3.2.1.1 Defining the Purpose of the Model 3.2.1.2 Determine the Degree of Detail of the Model 3.2.1.3 Sketch out Data Flow and Model Structure 3.2.2 Model Structure and Planning 3.2.2.1 Structure the Work File 3.2.2.2 Document the Model 3.2.2.3 Consistently Name Work File and Worksheets 3.2.2.4 Use Uniform Formatting 3.2.2.5 Define and Separate Input and Output Value 3.2.2.6 Create Import and Export Worksheets 3.2.3 Model Setup 3.2.3.1 Structure the Model as Simply as Possible 3.2.3.2 Give a Unified Structure to the Worksheets 3.2.3.3 Assure the Quality of all Input Data 3.2.3.4 Avoid Complex Formulas 3.2.3.5 Assure Simple Navigation via Hyperlinks 3.2.3.6 Conduct Sensitivity and Time Series Analysis 3.2.4 Quality Control 3.2.4.1 Utilize Control Functions 3.2.4.2 Protect the Model 3.2.4.3 Check and Test the Model 3.2.4.4 Check and Test the most Vulnerable Elements of the Model 3.2.5 Model Presentation 4 Implementing the Top-10 Financial Modeling Standards with Reference to an Example 4.1 Define the Modeling Purpose 4.2 Separate the Problem into independent Sub-Sections (Modules) 4.3 Provide a Graph of the Flow of Data and the Model Structure 4.4 Separate Inputs from Outputs 4.5 Choose a Unified Layout for the Worksheets 4.6 Use Unified Formatting 4.7 Avoid Complex Formulas and Use Only One Type of Formula


4.8 Avoid Circular References 4.9 Work with Control Functions 4.10 Present the Results Professionally

Methods of teaching and study Literature study and case studies to apply the standards of financial modeling. With the chapter “Financial Modeling Standards” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of financial modeling standards. These materials provide a comprehensive guide to the implementation of the financial modeling standards in all other modules. The case studies provided by the Center for Financial Modeling (CfFM) help to apply the standards of financial modeling to a given task in a way that is both model-based and close to the topics seen in applied work. Excel-based exercises help to test the newly acquired skills. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Barlow, J. F. (2005) Excel Models for Business and Operations Management, 2nd edition (Chichester (England): John Wiley & Sons).

Benninga, S. (2014) Financial Modeling, 4th edition (Cambridge, Massachusetts and London, England: The MIT Press).

Benninga, S. (2011) Principles of Finance with Excel, 2nd edition (New York, Oxford: Oxford University Press).

Day, A. L. (2012) Mastering Financial Modelling in Microsoft Excel: A Practioner's Guide to Applied Corporate Finance, 3rd edition (London: FT Prentice Hall).

Ernst D., Häcker J. (2017, editors) Financial Modeling - An Introductory Guide to Excel and VBA Applications in Finance 1st edition, (Basingstoke (England) and New York (US): Palgrave Macmillan).

Ernst, D., Häcker, J. (2011) Applied International Corporate Finance, 2nd edition (München: Vahlen Verlag).

Fabozzi, F. J., Focardi, S. M./Petter N. K. (2006) Financial Modeling of the Equity Market: From CAPM to Cointegration, (Hoboken, NJ: Wiley & Sons).

Fabozzi, F. J. (2012) Encyclopedia of Financial Models (Hoboken, NJ: Wiley).

Fairhurst, D. S. (2012) Using Excel for Business Analysis: A Guide to Financial Modelling Fundamentals (Singapore: John Wiley & Sons).

Fast (Fast Standard Organisation Limited):http://www.fast-standard.org.

Graham, R. E. (1997) Financial Modelling - Training Manual (London: Euromoney Publications plc).

Grossman, T. A., Özlük, Ö. (2010) Spreadsheets Grow Up: Three Spreadsheet Engineering Methodologies for Large Financial Planning Models, (San Francisco: European Spreadsheet Risks Int. Grp.).

Ho, T., Sang B. L. (2004) The Oxford Guide to Financial Modeling (New York: Oxford University Press).

Holden, C. W. (2014) Excel Modeling in Corporate Finance, 4th edition (London: Prentice Hall).

ICAEW (Institute of Chartered Accountants in England and Wales): http://www.icaew.com.

Jackson, M., Staunton, M. (2001) Advanced modelling in finance using Excel and VBA, (Chichester: Wiley & Sons).

http://www.icaew.com/

Lynch, P. (2010) Financial Modelling for Project Finance, 2nd edition (London: Euromoney Books).

Mayes, T. R., Shank, T. M. (2011) Financial Analysis with Microsoft Excel, 6th edition (Mason OH: Cengage Learning).

Ongkrutaraksa, W. (2006) Financial Modeling and Analysis: A Spreadsheet Technique for Financial, Investment, and Risk Management, 2nd edition (Frenchs Forest: Pearson Education Australia).

Pignataro, P. (2013) Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity (Hoboken, NJ: Wiley).

Powell, S. G., Baker, K. R. (2009) Management Science: the art of modelling with Spreadsheets, 3rd edition (New Jersey: John Wiley & Sons).

Powell, S. G., Batt, R. J. (2008) Modeling for Insight: A Master Class for Business Analysts, (New Jersey: John Wiley & Sons).

Proctor, S. (2009) Building Financial Models with Microsoft Excel: A Guide for Business Professionals, 2nd edition (Hoboken, NJ: Wiley).

Read, N., Batson, J. (1999) Spreadsheet Modelling Best Practice, (England and Wales: Institute of Chartered Accountants).

Rees, M. (2008) Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level, (Chichester (England): John Wiley & Sons).

Sengupta, C. (2010) Financial Analysis and Modeling using Excel and VBA, 2nd edition (New Jersey: John Wiley & Sons).

Soubeiga, E. (2013) Mastering Financial Modeling: A Professional’s Guide to Building Financial Models in Excel (New York: McGraw-Hill).

Spreadsheet Standard Review Board (2013) Best Practice Spreadsheet Modeling Standards Commentary & Examples 7.0, (Melbourne: BPM Analytical Empowerment Pty Ltd.).

Swan, J. (2008) Practical Financial Modelling: A Guide to Current Practice, 2nd edition (Oxford: Elsevier).

Tjia, J. S. (2009) Building Financial Models: The Complete Guide to Designing, Building and Applying Projection Models, 2nd edition (New York: McGraw Hill).

Winston, W. (2014) Microsoft Excel 2013 Data Analysis and Business Modeling (North Sebastopol: Microsoft Press).

Specifics E-Learning, Case studies, Excel-based exercises

Organisation

ECTS-Credits 2.5

Workload: 2.5 ECTS-Credits x 25 hours = 62.5 hours, based on the following distribution:

Lectures -

Preparation/Self study Literature study: 50 hours / 40% Case studies: 40 hours / 32%

Excercises Exam preparation: 35 hours / 28%


Module Element I.2

Title of the module element Model Review

Responsible for the module Prof. Dr. Dr. Dietmar Ernst and Prof. Dr. Dr. Joachim Häcker

Structure


know the fundamentals and aims of model review and to describe them in their own words.

provide an overview of the most important types of errors in financial models and to compare these.

restate how errors in the development of models can be avoided by adherence to the standards of financial modeling.


independently acquire model review techniques with the help of the provided teaching materials.

recognize different types of errors in financial models, to analyze their cause with instruments from financial modeling and to provide an objective assessment of how to solve the problem with the help of model review approaches.

master and apply model review techniques in Excel as well as in more advanced and specialized software tools.

independently conduct a model review based on different financial models.

identify errors in financial models, document those and apply different model review functions.

create a transparent and complete documentation of the results of the model review.

present the results of the model review in front of customers. With regard to the qualification category of competencies, the course participants are able to:

apply the model review techniques and combine them with different modules such as financial management, corporate finance, portfolio management and derivatives.

solve new and unfamiliar model review tasks with the help of model review techniques.

manage a project in the area of model review and to develop independent solutions in a group of model review specialists.

develop suggestions for the elimination of errors.


Subject

System

Self

Social

1. Fundamentals of Model Review 1.1 The Term Model Review 1.2 Steps in the Model Review Process 2. Errors in Financial Models 2.1.1 Qualitative Errors 2.1.2 Quantitative Errors 3. Error Detection – Recognizing and Finding Errors 3.1 Logic Inspection 3.2 Tests 3.3 Analysis Tools 4. Examples of Applications of Analysis Tools 4.1 Brief Market Overview of Analysis Tools 4.2 Model Review with Microsoft Excel 4.2.1 Monitoring the Cell Contents 4.2.2 Using Formula Auditing 4.2.3 Recognizing and Tracking Errors 4.3 Model Review with Operis Analysis Kit (OAK) 4.3.1 Map 4.3.2 Reconstruct 4.3.3 Analyze Discrepancies 4.3.4 Optimize 5. Control Calculations 5.1 Control Calculations that Show the Concrete Numerical Deviation 5.2 Binary Control Calculations 6. Measures to Assess the Plausibility of the Results 6.1 Sensitivity Analysis 6.2 Scenario Analysis 7. Documentation

Methods of teaching and study Literature study, case studies about model review, Excel-based exercises as well as use of the software Operis Analysis Kit (OAK). With the chapter “Model Review” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of model review in financial modeling. These materials contain a detailed and extensive presentation about testing and assessment of financial models in the context of model review. The case studies provided by the Center for Financial Modeling (CfFM) help to implement a model-based and applied review for a given task. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Aurigemma, S., Panko, R. (2010) The Detection of Human Spreadsheet Errors by Humans versus Inspection (Auditing) Software. In: Proceeding of the (Sep.) 2010 EuSpRIG Conference, pp. 73-85. Download: http://arxiv.org/ftp/arxiv/papers/1009/1009.2785.pdf (accessed on 16.03.2015)

BPM Analytical Empowerment Pty Ltd and associated entities: Best Practice Spreadsheet Modeling.


Version 7. Download: http://www.ssrb.org/files/example_models/Best_Practice_Examples_6_1.zip (registration required, accessed on 27.06.2014)


Grossman, T. A., Özlük, Ö. (2010) Spreadsheets Grow Up: Three Spreadsheet Engineering Methodologies for Large Financial Planning Models, (San Francisco: European Spreadsheet Risks Int. Grp.).

Howard, P. (2007) Enterprise Spreadsheet Management, 2007. Download: http://www.bloorresearch.com/research/Research-Report/enterprise-spreadsheet-management/( accessed on 09.06.2015)

Panko, R. (2008a) What we know about spreadsheet errors. Published in the Journal of End User Computing’s Special issue on Scaling Up End User Development, Volume 10, No 2. Spring 1998, pp. 15-21. Revised version as web-based, 35 page working paper of Mai 2008, Download: http://panko.shidler.hawaii.edu/SSR/Mypapers/whatknow.htm (accessed on 16.03.2015)

Panko, R. (2008b) Revisiting the Pank-Halverson Taxonomy of Spreadsheet Errors. In: Proceeding of the 2008 EuSpRIG Conference, pp. 199-220. Download: http://arxiv.org/ftp/arxiv/papers/0809/0809.3613.pdf (accessed on 16.03.2015)

Panko, R. (2006) Recommended Practices for Spreadsheet Testing. In: Proceeding of the 2006 EuSpRIG Conference, pp. 73-84.

Panko, R., Ordway, N. (2005) Sarbanes-Oxley: What About all the Spreadsheets? Controlling for Errors and Fraud in Financial Reports. In: Proceeding of the 2005 EuSpRIG Conference, pp. 15-47.

Prüher-von Au, M. (2010) Bedeutung von Modellen. In: Schramm, M.; Hansemeyer, E. (Eds.): Transaktionen erfolgreich Managen - Ein M&A-Handbuch für die Praxis, (Munich: Vahlen), pp. 65-78.

Pryor, L. (2004) When, why and how to test spreadsheets. In: Proceeding of the 2004 EuSpRIG Conference.

PwC (2014) Seminar: Model Review.

PwC (2012) MS Office Excel 2010 for Professionals.


Organisation

ECTS-Credits 2.5


Lectures -



http://www.ssrb.org/files/example_models/Best_Practice_Examples_6_1.zip

Module Element I.3

Title of the module element Financial Modeling with Excel


Structure


provide an overview of the most important Excel functions and be aware of their uses.

implement the application of the standards of financial modeling in Excel and describe them in their own words.


independently understand and apply Excel functions.

use their knowledge of Excel to develop an investment valuation model for a specified task while applying the principles of financial modeling.

expand a simple investment model by integrating a large number of Excel functions step by step.

acquire knowledge about additional Excel functions based on the ability to work with Excel.

independently structure tasks in the field of business and to solve them with the help of Excel.

critically check the results of Excel functions and to avoid black box problems.

Utilize Excel for simple tasks related to model review. With regard to the qualification category of competencies, the course participants are able to:

transfer the results of the Excel workshop to different modules such as financial management, corporate finance, portfolio management and derivatives and to combine them.

manage a project in the field of financial modeling and to develop independent solutions.

develop Excel models in such a way that they fulfil the standards of financial modeling.

critically challenge the assumptions, algorithms and results of a financial model developed in Excel.

present and defend the functions of Excel in a financial model in front of customers.

display the results of calculations done in Excel with the help of graphs also created in Excel and present hem in front of experts.


Subject

System

Self

Social


1. Developing a Financial Model 1.1 Defining the Task List 1.2 Identifying the Key Tasks 1.3 Visualizing Abstract Relations with Bubble Charts 2. Visual Display of a Financial Model 2.1 Structuring a Financial Model 2.2 Documenting a Financial Model 2.3 Structuring Large Financial Models Ergonomically 2.3.1 Creating a Menu 2.3.2 Creating Buttons 2.4 Borders and Lines: Providing Structure to the Data 2.5 Using Colors to Highlight Important Elements 3. Side Note: Using Key Combinations and the Ribbon to Work in Excel 3.1 Key Combinations and Sequences to work in Excel 3.2 Different Types of Key Combinations in Excel 3.2.1 Commands via the Ribbon 3.2.2 Key Combinations with Ctrl 3.2.3 Function Keys (F-Keys) and Other Important Key Combinations 4. Creating a Prototype in Excel 4.1 The Formula Sheet – The Translator 4.2 Use of Formulas 4.3 Activating Add-Ins 4.4 Making Use of Additional Functions 4.5 Using Names to Improve Clarity of the Formulas 4.6 Comments 5. Sending Signals to the Management 5.1 Signaling with Colors: Conditional Formatting to Create Information 5.2 Text as Signal: Providing Informative Messages 6. Data Collection 6.1 Secure Data Gathering 6.1.1 The Simple Excel Function Data Validation 6.1.2 Dynamic Data Validation 6.2 Importing Internal Data 6.2.1 Importing Data with VLookup 6.2.2 An Alternative: Index/Match 6.3 Importing External Data: Working with Security Prices from the Internet in Excel 7. Analysis Stage: Sensitivities and Scenarios 7.1 Sensitivity Analysis Using Data Tables 7.2 Scenarios with the Scenario Manager 7.3 Goal Seek 7.4 Solver – Goal seek for Challenging Tasks 8. Testing the Performance of a Financial Model 8.1 Formula Auditing: Checking the Flow of Data and Formulas 8.2 Support from Error Checking 8.3 Formula Evaluation: Formula Assessment Step by Step

9. Presenting Insights and Recommendations 9.1 Recommendations for the Presentation of Graphics 9.2 Creating simple Diagrams in Excel 9.3 Dynamic Diagrams 9.4 Selecting a suitable Diagram 9.4.1 Time Series Comparison: How does a Value Driver Change over Time? 9.4.2 Ranking Order Comparison: Which Aspect is the Most Important, Best or Worst? 9.4.3 Structural Comparison: How Large is the Share of a Specific Aspect in the Total? 9.4.4 Frequency Comparison: What is the Distribution across Specific Classes or Intervals? 9.4.5 Correlation Analysis: What are the Links between Different Factors?

Methods of teaching and study Literature study, case studies on the implementation of a simple investment calculation which employs various Excel functions as well as Excel-based exercises. With the chapter “Excel Workshop” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of financial modeling with Excel. A detailed and extensive presentation of the implementation of Excel functions considering while applying the financial modeling standards is presented. The case studies provided by the Center for Financial Modeling (CfFM) help to implement the Excel functions for a given task in a model-based and applied fashion. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Benninga, S. (2014) Financial Modeling, 4th edn (Cambridge, Massachusetts and London, England: The MIT Press).

Day, A. L. (2012) Mastering Financial Modelling in Microsoft Excel: A Practioner's Guide to Applied Corporate Finance, 3rd edn (London: FT Prentice Hall).


Fairhurst, D. S. (2012) Using Excel for Business Analysis: A Guide to Financial Modelling Fundamentals (Singapore: John Wiley & Sons).


Ongkrutaraksa, W. (2006) Financial Modeling and Analysis: A Spreadsheet Technique for Financial, Investment, and Risk Management, 2nd edn ( Frenchs Forest: Pearson Education Australia)

Powell, S. G. (2008) Modeling for Insight: A master class for business analysts, 1st edition, (J. Wiley& Sons, Hoboken).

Proctor, S. (2009) Building Financial Models with Microsoft Excel: A Guide for Business Professionals, 2nd edn (Hoboken, NJ: Wiley).

Rees, M. (2008) Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level (Chichester (England): John Wiley & Sons).

Sengupta, C. (2010) Financial Analysis and Modeling using Excel and VBA, 2nd edn (New Jersey: John Wiley & Sons).

Swan, J. (2008) Practical Financial Modelling: A Guide to Current Practice, 2nd edn (Oxford: Elsevier).

Tjia, J. S. (2009) Building Financial Models: The Complete Guide to Designing, Building and Applying Projection Models, 2nd edn (New York: McGraw Hill).



Organisation

ECTS-Credits 2.5


Lectures -



Module Element I.4

Title of the module element Financial Modeling with VBA


Structure


provide an overview of the most important VBA functions and to be familiar with their fields of application.

familiarize themselves with the functioning of the macro recorder and of VBA programming and to point out advantages and disadvantages.


independently understand and apply VBA functions.

utilize knowledge about VBA and to develop macros for simple tasks given.

independently gain an understanding of additional VBA functions based on the VBA skills developed.

independently structure tasks in the field of financial modeling and utilize VBA to solve them.

critically evaluate the results of macro programming and to avoid black box problems. With regard to the qualification category of competencies, the course participants are able to:

transfer the VBA skills to different modules such as financial management, corporate finance, portfolio management and derivatives and to implement solutions in these fields.

manage a project in the field of financial modeling and to develop independent solutions based on the VBA skills.

critically challenge the assumptions algorithms and results of a macro created with VBA.

present the VBA solutions used in a financial model in front of customers and to defend them.


Subject

System

Self

Social

1. Generating Excel Software Solutions 1.1 Preparing Excel for Macros 1.1.1 Activating the Developer Tools 1.1.2 Activating the Developer Tools 1.2 Possibility 1: Creating Applications with the Macro Recorder 1.2.1 Recording a Macro 1.2.2 Viewing the Programming Code of a Macro 1.2.3 Viewing the Programming Code of a Macro 1.3 Possibility 2: Programming with VBA


1.3.1 The Development Environment: Comfortable Creation, Management and Testing of Programs 1.3.2 The Immediate Window: Directly Viewing the Results 1.3.3 Clear Structure for Programs 1.3.4 Efficient Programming Using the Intelligence of the VBA Editor 1.3.5 Support from the Online Help 1.3.6 The Object Catalogue: Improved Knowledge about Objects 1.3.7 Fast Programing with the Key Combinations 1.3.8 Identifying and Avoiding Errors, Suggestions for Correcting Errors 2. Variables and the Most Important Data Types 2.1 Declaring a Variable 2.2 Conventions for Variable Names 3. Process Flow Models and Charts 3.1 Process Flow Models 3.2 Flow Chart 3.3 Hierarchy Chart 4. The Most Important Language Elements of VBA 4.1 Programming with Branches 4.1.1 IF Branches 4.1.2 Nested Decisions 4.1.3 Relational Operators 4.1.4 Logical Operators 4.1.5 Select Case: Better Structure than If 4.2 Loops 4.2.1 The Loop For…Next 4.2.2 The Do While…Loop 4.2.3 The Do Until…Loop 4.3 Programming Cells and Ranges 5. Comfortable Input and Output Using Dialogue Fields 5.1 Reading Data with the InputBox 5.2 Data Output with the MsgBox 6. Programming Your Own Dialogues 6.1 Steps Needed to Create Your Own Dialogue 6.1.1 Setting Properties of the Control Elements 6.1.2 Programming Control Elements 7. Creating Charts with VBA 7.1 Useful Programs for Diagrams 7.1.1 Saving Embedded Diagrams as Graphics 7.1.2 Printing Embedded Diagrams 7.1.3 Use of Color to Highlight Negative Numbers in a Diagram 7.1.4 Creating Dynamic Diagrams 8. Tool Kit: Practical Excel Tools for Modeling 8.1 Programming Headers and Footers 8.2 Transferring Comments to a List 8.3 Creating a Table of Contents

8.4 Protecting Cells with Formulas

Methods of teaching and study Literature study, case studies on the implementation of simple VBA applications as well as VBA-based exercises. With the chapter “VBA Workshop” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of financial modeling with VBA. An extensive presentation of the implementation of VBA functions is presented. The case studies provided by the Center for Financial Modeling (CfFM) help to implement the VBA functions for a given task in a model-based and applied fashion. VBA- based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning. A specific VBA e-learning tool was developed for programming with VBA.

Literature/Study materials Albright, Chr. (2015) VBA for Modelers: Developing Decision Support Systems with Microsoft Office Excel, 5th edn (Boston, MA: Cengage Learning)

Benninga, S. (2014) Financial Modeling, 4th edn (Cambridge, Massachusetts and London, England: The MIT Press).


Goossens, F. (2015) How to Implement Market Models using VBA, (New Jersey: Wiley)


Löffler, G., Posch, P. (2011) Credit Risk Modeling using Excel and VBA, (Hoboken, NJ: Wiley)

Rouah, F. D., Vainberg, G. (2007) Option Pricing Models and Volatility Using Excel-VBA, (New Jersey: Wiley).


Tjia, J. S. (2009) Building Financial Models: The Complete Guide to Designing, Building and Applying Projection Models, 2nd edn (New York: McGraw Hill).


Organisation

ECTS-Credits 2.5


Lectures -




Module II

Module name Applied Financial Modeling

Contribution of the module to the study targets

Qualifications targeted

Contents and methods:

The students are able to:

apply the standards of financial modeling when setting up financial models for different tasks.

structure a problem in the field of finance using methods of financial modeling, to transform the structure into a financial model and to use it in order to solve a specific task.

represent complex financial instruments and capital market models based on the standards of financial modeling in order to provide decision support.

use Excel functions and VBA functions in a targeted fashion when solving problems in finance.

transfer knowledge and competencies needed to solve specific tasks to different applications and in this way combine different fields of finance.

professionally present the financial modeling results in front of academics or decision makers in business.

Contens

Financial Management

Corporate Finance

Portfolio Management

Derivatives

Financial Modeling Project

Requirements for participation

Knowledge, Abilities, Competencies

Successful completion of the module Foundations of Financial Modeling

Preparation for the module

Reading of the literature listed in the module elements

Type of module

Required module

Level of the module

EQR 7

Module use

Link with other modules of the Financial Modeling Standards

course of study

Model Review

Financial Modeling with Excel

Financial Modeling with VBA



German or English


Type and duration (min) Share %

Exam 180 100%

The examination consists of 220 test questions. The Module 2 Exam includes 4 submodules, whereas only three out of four submodules should be answered. The test taker can choose not to answer one of the submodules. When registering for the exam according to §3 1) (c), the test taker must point out which 3 submodules he or she would like to answer and which submodule he or she will not answer. Should a test taker decide to answer the submodule that he or she has declared not to answer, any points earned from this submodule cannot count toward the minimum amount of points needed to pass and this submodule will be scored with zero points. Each submodule has 40 questions including 12 multiple choice questions, 0 single choice questions, 1 fill in the blank questions and 27 math problems with a total of 216 possible points to earn per submodule. A total of 648 points can be earned in the Module 2 exam. The exam for module 2 is considered passed when at least 162 points per submodule (75% of total possible points) have been earned.


Number of ECTS-Credits awarded 20 ECTS


Module Element II.1

Title of the module element Financial Modeling in Financial Management


Structure


provide an overview of the most important methods of investment valuation and financing instruments.

compare the most important methods of investment valuation and financing instruments.

critically discuss advantages and disadvantages of the methods and draw conclusions for their application in applied work.

put in perspective the topics of investment and financing in relation to other modules, specifically corporate finance.


use their knowledge about methods of investment valuation and financing instruments to develop professional models to assess the viability of investment and financing opportunities which are based on the financial modeling standards.

independently structure complex tasks in investment and financing and to develop independent modules to solve these tasks.

critically evaluate the results of investment and financing decisions and to explain differences.

interpret results of investment and financing measures and to independently draw conclusions for investment and financing decisions.

evaluate the structure and results of investment and financing models with the help of model review methods.


manage a project in the area of investment and financing and to develop proprietary solutions in a group of finance specialists.

compile a transparent and complete documentation of the assumptions and methods for a given investment or financing project.

recognize the linkages among the various investment and financing methods and to apply the method which is applicable to the applied case at hand.

structure the process of investment and financing decisions and to apply the standards of professional financial modeling.

apply their knowledge to given investment and financing projects and to adjust it to the actual valuation situation.

solve new and unfamiliar tasks in the field of investment and financing with the help of financial modeling instruments.

critically challenge the assumptions, algorithms and results of every investment and financing decision.

present and defend the valuation results in front of clients.


Subject

System

Self

Social

1. Investment 1.1 The Term Investment and Methods of Investment Analysis 1.2 Static Methods of Investment Analysis 1.2.1 Cost Comparison Method 1.2.2 Profit Comparison Method 1.2.3 Profitability Calculation 1.2.4 Static Amortization Method 1.2.5 Comparison and Assessment of the Methods of Static Investment Analysis 1.3 Dynamic Investment Valuation 1.3.1 Net Present Value Method 1.3.2 Internal Rate of Return 1.3.3 Annuity Method 1.3.4 Comparison and Assessment of the Methods of Dynamic Investment Analysis 2. Fundamental Rules of Financing 2.1 The Golden Rule for Balance Sheets 2.2 The Relationship between Equity Capital and Debt Capital and the Leverage Effect 2.2.1 Assumptions about the Leverage Effect 2.2.2 Calculations concerning the Leverage Effect 3. Analysis of Key Figures 3.1 Key Return Figures 3.2 Key Figures about Financial Structure 3.3 Key Figures on the Asset Structure 3.3.1 The Ratio of Fixed Assets to Current Assets 3.3.2 Key Figures to Study the Investment and Depreciation Policy 3.3.3 Analysis of Net Working Capital 3.4 Key Figures for the Capital Structure 3.5 Key Figures for the Structure of Earnings 3.6 Cash Flow Key Figures 4. The Ordinary Capital Increase 4.1 Assumptions concerning the Ordinary Capital Increase 4.2 Calculating the Values on the Balance Sheet 4.3 Calculating the Value of the Subscription Rights 5. The Long-term Loan 5.1 Assumptions concerning the Long-term Loan 5.2 The Annuity Loan 5.3 The Amortizable Loan


5.4 The Bullet Loan 5.5 Comparison of the Various Types of Amortization 6. Bonds 6.1 Assumptions for the Bond 6.2 Analyzing the Bond from the Issuer Perspective 6.3 Analyzing the Bond from the Investor Perspective 6.4 Present Value Method for known Spot Rates 6.5 Analysis of the Present Value Approach 6.6 Risk Analysis 6.6.1 Duration 6.6.2 Convexity 6.6.3 Immunization and Duration 7. Short-term Financing using the Example of the Supplier Credit 7.1 Interest on the Supplier Credit 7.2 Granting a Supplier Credit 7.3 Delaying Payment on a Supplier Credit 8. The Cash Flow 8.1 Basics 8.2 Calculating the Gross Cash Flow from Operative Business Activities 8.3 Calculating the Operative Free Cash Flow 8.4 Calculating the Net Cash Flow 8.5 Control Calculations 9. Financing via Shortening of the Capital Commitment Period 9.1 Premises when Shortening the Capital Commitment Period 9.2 Reducing Receivables 9.3 Inventory Reductions

Methods of teaching and study Literature study, case studies on the implementation of a valuation exercise in investment and financing as well as Excel-based exercises. With the chapter “Investment Management” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of financial modeling of investment and financing. The implementation of the methods of investment and financing in Excel while considering the standards of financial modeling is presented in a detailed and comprehensive manner. The case studies provided by the Center for Financial Modeling (CfFM) help to implement the methods of investment and financing for a given task in a model-based and applied fashion. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Benninga, S. (2014) Financial Modeling, 4th edn (Cambridge, Massachusetts and London, England: The MIT Press).

Benninga, S. (2011) Principles of Finance with Excel, 2nd edn (New York, Oxford: Oxford University Press).

Day, A. L. (2012) Mastering Financial Modelling in Microsoft Excel: A Practioner's Guide to Applied Corporate Finance, 3rd edn (London: FT Prentice Hall).


Higgins, R. (2012) Analysis for Financial Management, 10th edn (New York: McGraw-Hill).

Madura, J. (2010) International Financial Management, 10th edn (Mason OH: South-Western - Division of Thomson Learning).


Van Horne, J.C./Wochowicz, J.M. (2009) Fundamentals of Financial Management, 13th edn (Harlow (England): Pearson Education Limited).


Organisation

ECTS-Credits 5

Workload: 5 ECTS-Credits x 25 hours = 125 hours, based on the following distribution:

Lectures -




Module Element II.2

Title of the module element Financial Corporate Finance


Structure


provide an overview of the most important valuation methods and to compare these.

relate corporate finance to other modules such as financial management, portfolio management and derivatives.

relate corporate planning to corporate valuation and to describe the linkages in their own words.


use their knowledge about planning and valuation methods to develop a professional standard model for corporate valuation which incorporates the principles of financial modeling.

obtain the data necessary for a corporate valuation from information providers such as Bloomberg or Thomson Reuters and to process the data.

independently structure complex tasks in corporate valuation and to develop independent modules to solve these tasks.

critically evaluate the results of the corporate valuation and to clarify any differences.

interpret the results of the corporate valuation and to independently draw conclusions for corporate finance transactions.

review the structure of the valuation model and the results of the corporate valuation with the help of a model review.


transfer the results from the corporate valuation to other modules such as financial management, portfolio management and derivatives and to combine them with these modules.

manage a project in the field of corporate valuation and to develop proprietary solutions in a team of valuation experts.

compile a transparent and comprehensive documentation of assumptions and methods for a given valuation project.

structure the process of corporate valuation and to apply the standards of professional financial modeling.

master theoretical and empirical challenges of corporate valuation.

apply their knowledge to specific valuation projects and to adjust it to actual valuation situations.

critically challenge the assumptions, algorithms and results of every valuation approach.

present and defend the valuation results in front of clients.


Subject

System

Self

Social

1. Overview of the Methods of Company Valuation 2. Company Valuation using Discounted Cash Flow Models 2.1 Basics of Corporate Planning 2.1.1 Planning Period 2.1.2 Planning Premises or Structure of Planning in the Model 2.2 WACC Approach 2.2.1 The Idea behind the WACC Approach 2.2.2 Calculating the Operative Free Cash Flows 2.2.3 Determining the Cost of Capital 2.2.4 Calculation of the Company Value 2.3 Period-specific WACC Approach 2.4 APV Approach 2.4.1 The Rational for the APV Approach 2.4.2 Calculating the Operative Free Cash Flows 2.4.3 Determining the Cost of Capital 2.4.4 Calculation of the Company Value 2.5 Equity Approach 2.5.1 The Structure of the Equity Approach 2.5.2 Calculating the Cash Flow to Equity 2.5.3 Determining the Cost of Capital 2.5.4 Calculation of the Company Value 2.6 Sensitivity Analysis 2.7 Scenario Analysis 2.7.1 Scenario Analysis with the Excel Scenario Manager 2.7.2 Scenario Analysis without the Excel Scenario Manager 2.8 Corporate Valuation for Professionals 2.8.1 Financing Assumptions 2.8.2 Calculating the Cost of Capital 2.8.2.1 Determining the Cost of Equity 2.8.2.2 Determining the Cost of Debt Capital 2.8.2.3 Calculating the WACC 2.8.3 Calculating the Company Value 3. Company Valuation using Market Capitalization and Book Value 3.1 Overview of Market Capitalization 3.2 Overview of Book Value 3.3 Valuation Process using Market Capitalization and Book Value 3.3.1 Obtaining the Required Data 3.3.2 Calculating the Market Capitalization 3.3.3 Calculating the Book Value


4. Stock Market Multiples 4.1 Overview of Stock Market Multiples 4.2 Valuation Process with Stock Market Multiples 4.2.1 Derivation of the Peer Group 4.2.2 Selection of Appropriate Multiples 4.2.3 Collection of the Required Data 4.2.4 Calculation of the Stock Market Multiples 4.2.5 Application of the Stock Market Multiples to the Target Company 5. Transaction Multiples 5.1 Overview of Transaction Multiples 5.2 Comparison of Stock Market and Transaction Multiples 5.3 Valuation Process with Transaction Multiples 5.3.1 Selection from the Database 5.3.2 Narrowing Down the Selection in Excel 5.3.3 Calculating the Transaction Multiples 5.3.4 Application of the Transaction Multiples to the Target Company 5.4 The Football Field Graph 5.4.1 Application of the Football Field Graph 5.4.2 The Modeling Process in Three Steps

Methods of teaching and study Literature study, case studies on the implementation of a corporate valuation exercise as well as Excel-based exercises. With the chapter “Corporate Finance” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic corporate finance. The implementation of the methods of corporate finance in Excel while considering the standards of financial modeling is presented in a detailed and comprehensive manner. The case studies provided by the Center for Financial Modeling (CfFM) help to implement the valuation methods for a given task in a model-based and applied fashion. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Agar, C. (2005) Capital investment & financing: a practical guide to financial evaluation, 1st edn (Butterworth-Heinemann: Oxford).

Baker, M.P., Ruback, R.S. (1999) Estimating Industry Multiples, (Harvard University).

Damodaran, A. (2013) A tangled web of values: Enterprise value, Firm Value and Market Cap (Working paper: New York).

Damodaran, A. (2009) The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, 2nd edn (New Jersey: Financial Times Prentice Hall).

Damodaran, A. (2002) Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 2nd edn (New York: Wiley).

Damodaran, A. (1999) The Dark Side of Valuation: Firms with no Earnings, no History and no Comparables, Department of Finance, Leonard N. Stern School of Business, New York University (New York: FT Press).

Devlin, W., Patwardhan, D. (2013) Measuring market inflation expectations, Australian Treasury Department.

Ernst D., Häcker J. (2017, editors) Financial Modeling - An Introductory Guide to Excel and VBA

Applications in Finance 1st edition, (Basingstoke (England) and New York (US): Palgrave Macmillan).

Ernst, D., Häcker, J. (2011) Applied International Corporate Finance, 2nd edn (Munich: Vahlen Publisher).

Fama, E.F. (1970) Efficient Capital Markets: A Review of Theory and Empirical Work,in Journal of Finance, 25(2), pp. 383-417.

Hanouna, P., Sarin, A., Shapiro, A. C. (2001) Value of Control: Some International Evidence, in: USC Marshall School of Business, Working Paper No. 01-4.

Herrmann, V., Richter, F. (2003) Pricing with performance-controlled Multiples, in Schmalenbach Business Review, 55, pp. 194-219.

Jensen, M. C., Ruback, R. S. (1983) The market for Corporate Control: The Scientific Evidence, in Journal of Financial Economics 11, pp. 5-50.

J.P.Morgan Cazenove (2013) European Pharmaceuticals, January 3, 2013 (via Thomson Reuters).

Kaplan, S., Ruback, R. (1995) The Valuation of Cash Flow Forecasts: An Empirical Analysis, in The Journal of Finance, 50(4), pp. 1059-1093.

Kim, M., Ritter, J.R. (1999) Valuing IPOs, in Journal of Financial Economics, 53, pp. 409-437.

Koller, T., Goedhardt, M., Wessels, D. (2010) Valuation: Measuring and Managing the Value of Companies, 5th edition, (New Jersey: John Wiley & Sons).

Lease, R., McConnell, J. J., Mikkelson, W. H. (1984) The Market of Value Control in Publicly Traded Corporations, in: Journal of Financial Economics 57, pp. 443-468.

McConnell, J. J., Servaes, H. (1990) Additional Evidence on Equity ownership and Corporate Value, in Journal of Financial Economics 27, pp. 595-612.

Petitt, B.S., Ferris, K.R. (2013) Valuation for Mergers and Acquisitions, 2nd edn, (New Jersey: Pearson Education).

Pratt, S. (2008) Valuing a Business, McGraw-Hill.

Rosenbaum, J., Pearl, J. (2013) Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions, 2nd edn (New Jersey: John Wiley & Sons).

Rotkowski, A., Clough, E. (2013) How to Estimate the Long-Term Growth Rate in the Discounted Cash Flow Method, (Willamette: Forensic Analysis Insights - Business Valuation, 9-20).

SIC Website: http://www.osha.gov/pls/imis/sicsearch.html

Tjia, J. (2009) Building financial models, the complete guide to designing, building, and applying projection models, 2nd edition (New York: McGraw-Hill).

Trugman, G. (2008) Understanding Business Valuation, 3rd edn (New York: American Institute of Certified Public Accountants).


Organisation

ECTS-Credits 5


Lectures -

Preparation/Self study Literature study: 50 hours / 40%

Excercises Exam preparation: 35 hours /

http://www.osha.gov/pls/imis/sicsearch.html


Case studies: 40 hours / 32% 28%

Module Element II.3

Title of the module element Financial Modeling in Portfolio Management


Structure


describe in their own words the foundations and aims of portfolio management.

analyze an optimization problem in portfolio management using tools of financial modeling and to provide an objective assessment about possible solutions with the help of financial modeling.

discuss the different approaches to the financial modeling of portfolio management.


illustrate the relevance of return and risk in portfolio management, calculate and interpret

different types of return and risk.

obtain the data necessary for portfolio management from information providers such as Bloomberg or Thomson Reuters and to process the data.

independently construct models for active and passive portfolio management in order to solve problems in portfolio management.

structure a problem in portfolio management with the help of financial modeling techniques and use different Excel functions and VBA functions in the process.

critically assess the results of portfolio optimization and illustrate differences among the optimization approaches.


transfer the results from portfolio management to different modules such as financial management, corporate finance and derivatives and to combine them with these modules.

structure the portfolio management process and to apply the financial modeling standards.

solve new and unfamiliar tasks in the field of portfolio management with the help of instruments from financial modeling.

combine different approaches to active and passive portfolio management in order to implement proprietary solutions.

reach decisions that have a scientific foundation within a limited timeframe.

critically assess portfolio management models that were developed by third parties.

present and discuss results and conclusions in front of a professional audience.


Subject

System

Self

Social

1. Return 1.1 Discrete Return 1.1.1 Simple Average Return 1.1.2 Arithmetic Average Return 1.1.3 Geometric Average Return or Time-weighted Return 1.1.4 Comparison of Time-weighted and Average Arithmetic Return 1.1.5 Money-weighted Return 1.2 Continuous Return 1.3 Comparison of Continuous and Discrete Return 1.4 Returns for Different Time Periods 1.4.1 Adjusting the Simple Average Return 1.4.2 Adjusting the Arithmetic Average Return 1.4.3 Adjusting the Time-weighted Return 1.4.4 Adjusting the Continuous Return 1.5 Calculation of Prices based on the different Types of Returns 2. Risk 2.1 The Term Risk 2.2 How to Estimate Risk 2.2.1 Return as a Random Number 2.2.2 Random Walk 2.3 Categories of Risk 2.3.1 Two-sided Risk Measures 2.3.2 One-sided Risk Measures 2.3.3 Other Risk Measures 2.4 Volatility 2.4.1 Calculations 2.4.2 Histogram, Density Function and Distribution Function 2.4.3 The Limit Theorem in Statistics 2.5 Variance 2.6 Standard Deviation 2.7 Risk Measures for Different Time Periods 2.7.1 Adjusting the Variance 2.7.2 Adjusting the Standard Deviation 2.8 Moving Volatility 2.9 Covariance 2.10 Coefficient of Correlation 2.11 Semi-Variance 2.12 Beta Factor 2.13 Value at Risk 3. Overview of Active and Passive Portfolio Management 3.1 Introduction to the Topic 3.2 Solving Optimization Problems with the Excel Solver


3.2.1 Installing the Solver 3.2.2 Activating and Using the Solver 3.3 Matrix Operations in Excel 3.3.1 General Display in Excel 3.3.2 Transposing Vectors and Matrices in Excel 3.3.3 Multiplying Vectors and Matrices in Excel 4. Active Portfolio Management 4.1 Absolute Optimization 4.1.1 Minimum Variance Portfolio 4.1.2 Minimum Variance Portfolio without Restrictions on Short Selling 4.1.3 Minimum Variance Portfolio with Lower and Upper Bound 4.1.4 Efficient Portfolio for Given Return 4.1.5 Tangency Portfolio 4.1.6 Maximum Return Portfolio 4.1.7 Optimum Portfolio without Riskless Investment Opportunity 4.1.8 Optimum Portfolio with Riskless Investment Opportunity 4.2 Relative Optimization 4.2.1 Reasons for the Use of Relative Optimization 4.2.2 General Types of Optimization relative to a Benchmark 4.2.3 Single Index Model and Relative Optimization 4.2.4 Summary of the Results of the Relative Optimization 5. Passive Portfolio Management 5.1 Quadratic Optimization 5.1.1 Index Tracking Starting with Relative Optimization 5.1.2 Index Tracking based on Markowitz 5.2 Constrained Regression 5.3 Linear Optimization 5.4 Summary of the Results for Passive Portfolio Management

Methods of teaching and study Literature study, case studies on the implementation of portfolio optimization as well as Excel-based exercises. With the chapter “Portfolio Management” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of financial modeling in portfolio management. The implementation of the methods of portfolio management in Excel while considering the standards of financial modeling is presented in a detailed and comprehensive manner. The case studies provided by the Center for Financial Modeling (CfFM) help to implement the portfolio management techniques for a given task in a model-based and applied fashion. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Alexander, Carol (2008) Market Risk Analysis, Volume 1, Quantitative Methods in Finance, (Chichester: John Wiley & Sons).

Benninga, S. (2014) Financial Modeling, 4th edn (Cambridge, Massachusetts and London, England: The MIT Press).

Benninga, S. (2011) Principles of Finance with Excel, 2nd edn (New York (US): Oxford University Press).

Bodie, Z., Kane, A., Marcus, A. J. (2014) Investments, 10th edn (McGraw-Hill Education).


Fabozzi, F. J. (2012) Encyclopedia of Financial Models (Hoboken (US): Wiley).

Fabozzi, F., Markowitz, H. (2011) The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, 2nd edn (Hoboken (US): Wiley & Sons, Inc).

Fabozzi, F. et. al. (2010) Quantitative Equity Investing: Techniques and Strategies, (Hoboken (US): Wiley & Sons, Inc).

Markowitz, H. (2008) Portfolio Selection: Efficient Diversification if Investments, 2nd edition, (Basil Blackwell).

Meucci, Attilio ( 2007) Risk and Asset allocation; (Berlin, Heidelberg: Springer)

Reilly, F., Brown, K. (2012) Investment Analysis and Portfolio Management, 10th edn (Mason (US): South Western Cengage Learning).

Roll, R. (1992) A Mean / Variance Analysis of Tracking Error, in: The Journal of Portfolio Management, Summer, S. 13-22

Taylor, St. J. (2005) Asset Price Dynamics, Volatility, and Prediction, (Princeton: Princeton University Press).


Organisation

ECTS-Credits 5


Lectures -




Module Element II.4

Title of the module element Derivatives


Structure


state the principles of options and futures in their own words.

analyze an investment or hedging situation and to provide an objective assessment concerning the solution of the problem with the help of derivatives.

critically discuss the chances and risks of conditional and unconditional derivatives.


illustrate the functioning of conditional and unconditional derivatives and to explain and interpret the influence of different value drivers.

obtain the data necessary for the valuation of plain vanilla derivatives from information roviders such as Bloomberg or Thomson Reuters and to process the data.

structure a problem in the area of investing or hedging with the help of derivatives in order to solve tasks in the area of investing or hedging.

independently create models for the pricing of derivatives and to use different Excel functions and VBA functions in the process.

critically assess the results of using derivatives and to interpret chances and risks.


transfer the results from the module on derivatives to different modules such as financial management, corporate finance and portfolio management and to combine them with these modules.

structure the process of modeling of derivatives and to apply the financial modeling standards.

solve new and unfamiliar tasks in the field of investing or hedging with the help of derivatives.

independently develop strategies for the use of derivatives.

critically assess strategies for the use of derivatives developed by third parties.

reach decisions that have a scientific foundation within a limited timeframe.

present and discuss results and conclusions in front of a professional audience.


Subject

System

Self

Social

1 Options Basics 1.1 Terminology and Types of Options 1.2 Differentiating Features of Options 1.2.1 Type of Option 1.2.2 Time of Exercise 1.2.3 Underlying of the Option 1.2.4 Settlement of an Option 1.3 What are the Value Drivers in Option Pricing? 1.3.1 The Price of the Underlying 1.3.2 The Volatility 1.3.3 The Riskless Rate of Interest 1.3.4 Dividend Payments 1.3.5 The Term to Maturity 1.3.6 An Overview of the Value Drivers 2. Valuation of Options 2.1 Basics of Option Valuation 2.1.1 Intrinsic Value 2.1.2 Time Value 2.1.3 Moneyness of an Option 2.2 Models for determining the Option Price 2.2.1 Put-Call-Parity 2.2.2 Duplication Method 2.2.3 Binomial Model 2.2.4 The Black-Scholes Model 2.2.5 Model Assessment 2.2.6 Greeks 2.2.7 Additional Measures 3. What is involved in the Four Basic Option Strategies? 3.1 Long Call 3.2 Short Call 3.2.1 Naked Call Writing 3.2.2 Covered Call Writing 3.3 Long Put 3.4 Short Put 4. Fundamentals of Futures 4.1 What are Futures? 4.2 Which Futures Contracts are Essential in Applied Work? 4.2.1 Index Futures 4.2.2 Interest Rate Futures 4.2.3 Currency Futures 4.2.4 Commodity Futures 4.2.5 Single Stock Futures 5. Pricing of Futures Contracts 5.1 Index Futures 5.2 Interest Rate Futures 5.3 Currency Futures 5.4 Commodity Futures 5.5 Single Stock Futures


6. What is involved in the Basic Futures Strategies? 6.1 Long Futures 6.2 Short Futures 6.3 Spreads 6.3.1 Purchasing a Spread 6.3.2 Inter-Market Spread 6.3.3 Inter-Contract Spread and Intra-Contract Spread 6.3.4 Cash-and-Carry Arbitrage

Methods of teaching and study Literature study, case studies on the calculation of derivatives as well as Excel-based exercises. With the chapter “Derivatives” of the textbook “Financial Modeling” and additional literature sources, the course participants have access to a comprehensive set of materials on the topic of derivatives in portfolio management. The calculation of derivatives in Excel while considering the standards of financial modeling is presented in a detailed and comprehensive manner. The case studies provided by the Center for Financial Modeling (CfFM) help to apply the derivatives for a given task in a model-based and applied fashion. Excel-based exercises help to critically assess the material studied. Test questions help in the exam preparation. The self-study of the participants is supported via e-learning.

Literature/Study materials Benninga, S. (2014) Financial Modeling, 4th edn (Cambridge, Massachusetts and London, England:

The MIT Press).

Benninga, S. (2011) Principles of Finance with Excel, 2nd edn (New York (US): Oxford University Press).

Bloss, M., Ernst, D., Häcker, J. (2008) Derivatives: An Authoritative Guide to Derivatives for Financial

Intermediaries and Investors, (Munich: Oldenbourg Publisher).

Bloss, M., Ernst, D., Häcker, J., Sörensen, D. (2010) Financial Engineering, (Munich: Oldenbourg

Publisher).


Hull, J., C. (2013) Fundamentals of Futures and Options Markets, 8th edn (Boston: Pearson Education

Limited).

Hull, J.C. (2014) Options, Futures and Other Derivatives, 9th edn (Harlow (England): Pearson

Education Limited).

Rees, M. (2008) Financial Modelling in Practice: A Concise Guide for Intermediate and Ad-vanced

Level, (Chichester (England): John Wiley & Sons).

Sengupta, C. (2010) Financial Analysis and Modeling using Excel and VBA, 2nd edn (New Jersey: John

Wiley & Sons).


Organisation

ECTS-Credits 5


Lectures -



“certified financial modeler” · module aims of the des certificate course “certified...

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