Spreadsheet Modeling for Finance
- 1.5 credits
- Prerequisite: K507
In this course we will use optimization and Monte Carlo simulation to help the student learn how to analyze many important finance problems. Many of our topics will use both optimization and simulation. The primary emphasis of the course will be on using Monte Carlo analysis in capital budgeting, VAR analysis for investments, hedging equity, fixed income, FX and commodity risk, and the use of Monte Carlo simulation in option pricing
- Getting data off the web and from Access, using text functions to fix messed up data.
- Markowitz portfolio optimization and fixed income immunization models
- Using scoring rules to analyze the credit granting decision and the Grossman Hart approach to agency theory.
- Optimizing technical analysis trading rules.
- Obtaining realistic inputs into capital budgeting simulations; Modeling sales volume.
- Modeling price and cost in capital budgeting analysis.
- Modeling stock prices via bootstrapping and the lognormal random variable. Introduction to VAR.
- Modeling commodity prices and FX rates.
- Modeling interest rates.
- Scenario approach to portfolio management.
- Pricing exotic options with Monte Carlo simulation.
- Valuing real options via Monte Carlo simulation.
- Using Risk Optimizer to model flexibility in capital budgeting decisions.
Final Grade is based on weekly homework (50%) and Final Exam (50%)