Financial Modeling, 3rd Edition | 
 enlarge | Author: Simon Benninga
Publisher: The MIT Press
Category: Book
List Price: $85.00
Buy New: $58.90
You Save: $26.10 (31%)
New (27) Used (12) from $57.98
Rating:  7 reviews
Sales Rank: 2635
Media: Hardcover
Edition: 3
Pages: 1168
Number Of Items: 1
Shipping Weight (lbs): 3.8
Dimensions (in): 9.4 x 7.1 x 1.8
ISBN: 0262026287
Dewey Decimal Number: 332.015118
EAN: 9780262026284
Publication Date: February 29, 2008
Availability: Usually ships in 24 hours
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Product Description
Too often, finance courses stop short of making a connection between textbook finance and the problems of real-world business. Financial Modeling bridges this gap between theory and practice by providing a nuts-and-bolts guide to solving common financial models with spreadsheets. Simon Benninga takes the reader step by step through each model, showing how it can be solved using Microsoft Excel.
The long-awaited third edition of this standard text maintains the "cookbook" features and Excel dependence that have made the first and second editions so popular. It also offers significant new material, with new chapters covering such topics as bank valuation, the Black-Litterman approach to portfolio optimization, Monte Carlo methods and their applications to option pricing, and using array functions and formulas. Other chapters, including those on basic financial calculations, portfolio models, calculating the variance-covariance matrix, and generating random numbers, have been revised, with many offering substantially new and improved material. Other areas covered include financial statement modeling, leasing, standard portfolio problems, value at risk (VaR), real options, duration and immunization, and term structure modeling. Technical chapters treat such topics as data tables, matrices, the Gauss-Seidel method, and tips for using Excel. The last section of the text covers the Visual Basic for Applications (VBA) techniques needed for the book. The accompanying CD contains Excel worksheets and solutions to end-of-chapter exercises.
Praise for the previous editions:
"Benninga has a clear writing style and uses numerous illustrations, which make this book one of the best texts on using Excel for finance that I've seen."
--Ed McCarthy, Ticker Magazine
"The author describes this as a 'cookbook' and that is a good analogy.... Its breadth is extensive, covering simple present valuing and cost of capital ... to the likes of real options and early exercise of American-style options.... A worthwhile acquisition."
--Paul Dentskevitch, Risk Magazine
"Financial Modeling is highly-recommended to readers who are interested in an introduction to basic, traditional approaches to financial modeling and analysis, as well as to those who want to learn more about applying spreadsheet software to financial analysis."
--Edward Weiss, Journal of Computational Intelligence in Finance
"Financial Modeling belongs on the desk of every finance professional. Its no-nonsense, hands-on approach makes it an indispensable tool."
--Hal R. Varian, Dean, School of Information Management and Systems, University of California, Berkeley
"This is applied finance theory for the professional at its best. As a student, I and countless others learnt the intricacies of Lotus and financial theory from Professor Benninga's first booka Numerical Techniques in Finance. Now, as a professional, I do not have to 're-invent the wheel' in Excel. An invaluable guide. A must for all financial analysts."
--Vikas Nath, Global Strategist, Emerging Equity Markets, Union Bank of Switzerland, London
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| Customer Reviews: Read 2 more reviews...
 superlative treatment of finance February 15, 2008
A. Ali (Minneapolis, MN USA)
8 out of 10 found this review helpful
This book is nonpareil: there's nothing presently on the market that can compare in coverage, lucidity, and pedagogical skill. This is a must-have for both MBA and MFE students. For portfolio theory, option theory, and the use of (naive) Monte Carlo methods for pricing exotic options, this book should be the first port of call. Also included in portfolio theory is an intelligible treatment of the Black-Litterman model -- the first I've seen that's clear to understand -- given with spreadsheet models (this alone justifies the price of the book). Eveything is done using Excel, and the last 300+ pages give a clear exposition of various features of this spreadsheet program, including macros and VBA.
the single most useful book for finance students and professionals ever published February 20, 2008
Bachelier (Ile de France)
25 out of 29 found this review helpful
Simon Benninga's 3rd Edition of Financial Modelling with Excel is the single most useful book for finance students and professionals ever published and continues to offer an outstanding reference and textbook for students and practitioners of applied finance.
For further information, please use the "Look Inside" feature and examine the Table of Contents carefully, because I will emphasize selected portions.
It is difficult to overstate how useful and practical and helpful this work is for a wide audience and Financial Modelling is the single finance book I recommend for everyone after they have taken (or read themselves) Introductory Finance.
For those looking for "one-stop-shopping" for models that resemble those of professional financial analysts then there is no better value than Benninga's FM3.
Benninga's FM3 is a coal-face work for those who must make financial decisions using models. There are further specialist texts in topics covered here (credit modelling, portfolio construction, option pricing), but the models in FM3 are the first advanced models applied to loans, bonds, options, and equity portfolios. Master these and then specialized texts are easier to digest.
"Cookbook" metaphors are too strong and do not do this work justice, for Financial Modelling 3rd (FM3) is not a mere collection of recipes but rather topical introduction, explanation, and then direct technique.
If we can make a comparison with a "cookbook" then FM3 falls somewhere between "The Joy of Cooking" and "Mastering the Art of French Cooking." "Joy" combines chapters on technique, ingredients, and tools with dense pages of endless recipes, whereas "Mastering" emphasises technique and a few well-selected recipes.
The welcome new chapters cover bank valuation, the Black-Litterman approach to portfolio optimization, and Monte Carlo methods and applications to option pricing, and the previous 2nd edition's small chapter on using array functions and formulas has been expanded. The chapter on data downloads from YAHOO is also welcome, especially for those on a budget.
There is a single significant flaw in the work, which is excusable and redeemable. Far too often the discounting in the chapters is done over a flat interest rate curve. While the term structure of interest rates is covered, and historical term structures and parallel shifts and steepening and flattening is covered in isolation in a thorough chapter and with wonderful data files, the necessity and explicit connection of discounting from an appropriate yield curve is left implied and only mentioned in a few exercises. I would have preferred a "round up" chapter where each of the subjects treated (bond discounting, portfolio expected returns, options, etc.) under a yield curve with advanced models. Sure BLOOMBERG and REUTERS have these sort of things (often incorrectly) programmed, but students need to learn explicitly about them and do the exercise themselves to comprehend the importance of curve discounting.
The CD attached in the back of the book is alone worth the price, with over two score of models that are practical and adaptable for students and professionals alike. The files are stored and separated according to chapters and subject matter. Each file has logical progression of the concepts advanced in the book, and each separate sheet either stands alone or appropriately links to data and models on other sheets, so editing for your own purposes is a breeze.
For those who want to train themselves in Finance (not "personal finance") then I suggest reading Copeland, Weston, & Shastri's Financial Theory and Corporate Policy (4th Edition) and Brealey, Myers, and Marcus's "Corporate Finance" and "Investments" followed by working through FM3. Such a course would give any self-disciplined person the equivalent of a Masters of Science in Finance.
Full disclosure: I am thanked in the "Acknowledgements" for providing a few helpful comments on the second edition.
Benninga's Financial Modelin, 3e April 5, 2008
Michael Ezewoko
2 out of 2 found this review helpful
Professor Benninga's texts have consistently demonstrated an uncommon ease engaging the reader - well versed in not only theory and application, but also in the classroom, Benninga seems to anticipate student questions - providing thoughtful end-of-chapter questions and answers. Specifically, the Third Edition of "Financial Modeling" presents the theory and application of the Black-Litterman (BL) model - a lot of "well regarded" texts only show the naive construction of the non-augmented covariance matrix - which provides little competitive advantage to the portfolio manager or researcher - while BL is non-trivial and though proxies for the views necessary to form a posterior covariance matrix are often tricky to obtain, the BL model is necessary to incorporate the views of the researcher or portfolio manager and for any modern portfolio theory treatment - the application of this theory in Excel is a priceless exercise. Additionally, his addition of the chapter 4, "Building a Financial Model" thoroughly addresses financial statement modeling and its related issues - the tracking of assumptions and the examination of their feasibility with a sensitivity analysis. Finally, his treatment of Monte Carlo methods, Option Greeks, Bank valuation and event studies are unparalleled - a lot of good econometric texts treat event studies but usually, the student has no way of seeing its full implementation - Benninga's excel implementation just brings clarity. Generally, Benninga's texts are gems for not only self-study (the included CD allows you to follow along with the text) but also for MBA/MS students requiring a clear exposition of theory and application.
Financial Modeling, 3rd Edition
Quick Tip April 12, 2008
SelfTraining
9 out of 10 found this review helpful
Rather then comment extensively on the content of the book (as others have done rather well), I felt like I would pass this tip (which I wish I had known to prevent frustration). I feel that anyone without a working knowledge of Visual Basic, and manuevering around Excel should obtain the skill set with the well written technical sections. I would suggest starting with part VI introduction to Visual Basic (chapters 36-41) then moving on to Technical Consideration (chapters 29-35) and THEN moving onto the substantial matter of the first 4 parts. This will help keep you from getting frustrated while interacting with the software and allow you to focus on the concepts. Again this is only for individuals without a working knowledge of the platforms, if you do possess those skills then the above recommendation is a moot point.
Best quantiative finance book,ever! March 13, 2008
Jeff L (Chicago, IL United States)
5 out of 6 found this review helpful
The best quantitative finance book ever written! Dr. Benninga does a remarkable job of simplifying very complex subject matter. His Excel and VBA examples are easy to understand and presented very logically. I am not a programmer and have never used VBA, yet I was able to pick up the coding logic very quickly. You don't have to be a quatitative expert to read the book and like it. He writes in a "user friendly" fashion and the book covers plenty of fascinating subjects. Modern finance is mankind's greatest invention and Dr. Benninga's book makes it all understandable.
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