Financial Modeling

Financial modeling is the precondition for a successful career in finance. This book shows how to professionally solve the most important tasks in financial practice using Excel and VBA. The Excel models contain all calculations in the book. Financial Modeling is the first book on this subject written in German. The content of this book forms the basis for the training to become a Certified Financial Modeler.

This book aims at training managers, experts in finance, graduates and students specifically in financial modeling. Financial modeling is a competence required today by any graduate looking for their first job. Besides, knowledge of financial modeling improves career opportunities for financial experts. The book contains all Excel models and is designed as a course. It is thus suitable for teaching at universities and universities of applied sciences, but can also be used for in-house trainings in companies. The book's didactic structure also allows to additionally acquire knowledge in financial modeling in self-study. Successful learning and training in financial modeling can be proven by the title "Certified Financial Modeler". The corresponding exams are centrally taken by the German Institute of Corporate Finance (GICF).



1.    How can managers guarantee that it is not the proposal that is faulty and thus wrong decisions are taken?
The present book is the first book on financial modeling in German and combines expert knowledge of the essential financial areas with well founded EDP knowledge of Microsoft Excel and Microsoft Visual Basics for Applications (VBA). It is thus possible to optimally apply the contents of finance in order to solve given questions and to minimise errors.

2.    How can practical questions be modelled in a clear and structured way?
In the first part of the book, we would like to explain the basics of financial modeling to you. Financial modeling is based on a philosophy that will forever change your way of working. From now on, you will build all models so that a high level of efficiency and transparency will facilitate your daily work. As financial modeling is synonymous with continuous application and improvement, we start with a workshop. In this workshop, the basics of financial modeling are illustrated based on the solution of a simulated investment decision. The book comprises a CD-ROM, containing all case studies used in the book, modelled in Excel 2007. Progressively, the case studies in the book are explained and the different steps can be followed in Excel 2007 using the CD-ROM.

3.    How does modelling with Macros work?
The second part of the book treats the programming of Macros using VBA. Macros can increase the efficiency of your work with all Office applications. They allow standardising solutions that could not be created with standard Microsoft programs – or only at great effort. Experts in financial modeling always have an in-depth knowledge of VBA and are able to program their own solutions. In this chapter, you receive a first introduction to VBA. It is a great foundation for further self-study. Knowledge in VBA cannot be acquired by only reading the relevant book, but rather develop by constantly working with VBA, trial and error. The motto is "learning by doing".

Is knowledge in VBA essential for financial modeling? In our opinion, it is not obligatory as Microsoft Excel now offers solutions for almost all questions. However, knowledge in VBA can clearly simplify your life and help you to develop your own interfaces and solutions, facilitating an individualised and efficient practice. It shall be mentioned in this context that using VBA solutions in practice leads to black box solutions, i. e. models that are almost incomprehensible for third parties without knowledge in VBA. If these models contain programming errors, it is very difficult to identify and eliminate them.

4.    How can financial modeling be used in financial practice?
In parts three to five, the basics of financial modeling are applied to the core areas of modern finance
    •    corporate finance (part 3),
    •    portfolio management (part 4) and
    •    derivatives (part 5).
Thus it is not rudimentary knowledge acquired from a textbook that is applied, but rather techniques and methods used by professionals in the different fields in practice. The symbiosis of well founded Excel and VBA skills and professional knowledge in finance is our definition of financial modeling. Our motto is "The link between science and practice". Following this motto, the team of authors consists of practitioners in corporate finance, portfolio management and derivatives as well as scientists specialising in these areas.

5.    How do I build financial models in corporate finance?
In the third part, corporate finance, we focus on questions in corporate planning and company valuation, both being at the heart of all corporate finance transactions. As company valuation is a special question based on investment theory, there is a close relation between this part and the workshop on solving an investment decision from part one, as well as the VBA workshop in part two. The transposition of knowledge in company valuation into financial modeling is advantageous as it allows to systematically grasp and understand the complex connections between planning, cashflow and capital cost identification as well as final valuation. In company valuation, modern portfolio theory is used to determine capital cost. This is the link to the part on portfolio management.

6.    How do I build financial models in portfolio management?
The fourth part, portfolio management, treats the question how money can be invested. Under asset management considerations, it is central to know which return the portfolio to be created generates at which risk and how these two quantities can be measured. The two first chapters deal with this question. In the third chapter, it is explained how portfolios can be optimised. In this context it is recurred to the capital market models dominating financial practice (chapter four).

7.    How do I build financial models in the field of derivatives?
In the fifth part, derivatives, the valuation of options and futures is explained. For many students and practitioners in finance, derivatives are a closed book, consequently limiting the use of derivatives to a small group of experts. In our view, this is due to the fact that derivatives are not conveyed transparently. In financial modeling, it is explained how options and futures are evaluated, which input factors are required and on which algorithm the calculation is based. Once the valuation of derivatives in financial modeling understood, it is clear that it is based on a process similar to company valuation and that questions of risk are treated similarly to portfolio management.

8.    Who needs in-depth knowledge in financial modeling?
All graduates and practitioners in the finance should have well founded knowledge in financial modeling. However, experience shows that the majority of financial experts has absolutely no or only limited financial modeling skills. On the other hand, banks, financial service providers and companies are desperately looking for staff with in-depth Excel and VBA knowledge who can model the practical questions for their finance and controlling departments. Thus, knowledge in financial modeling is a unique selling point, offering ideal entry and career opportunities.

9.    How can I prove knowledge in financial modeling?
Anybody having gone through the book and having understood it, has very good knowledge in financial modeling. In order for you to proof your knowledge and qualification, we offer an exam that allows you, after passing, to hold the following title: [Titel]???


Das DICF bietet das weltweitweit anerkannte Zertifikat im Financial Modeling an:

Der Certified Financial Modeler