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2014/2015  BA-BHAAI1011U  Undergraduate financial modeling

English Title
Undergraduate financial modeling

Course information
Language English
Course ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration Summer
Course period Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Course instructor - Dr. Jim Bennett, University of Southern Maine
    Patricia Plackett - MPP
Main academic disciplines
  • Finance
  • Methodology
Last updated on 23-07-2014
Learning objectives
At the end of this course, students should:
  • understand various models used to estimate the components of a company’s cost of capital
  • understand techniques used to create forecasts of key financial statement items, and to use these items to perform a valuation analysis
  • be able determine the impact of an event on an asset’s price by identifying required data, implementing standard event study methodology, and interpreting the results
  • understand the concepts associated with mean-variance portfolio choice and practical limits on the use of optimizers
  • be able to construct profit and loss diagrams for both individual options and portfolios of options
  • understand various models of the term structure models
Course prerequisites
Students should have successfully completed an introductory undergraduate finance course. Also, since this course has an emphasis on model implementation via MS Excel, a basic familiarity with the use of spreadsheets will be helpful.
Prerequisites for registering for the exam
Number of mandatory activities: 1
Compulsory assignments (assessed approved/not approved)
Mandatory Mid-term Assignment: Students will work in groups to analyze and value a listed company using information gathered from market sources and financial statements. Each group will present its work to the class.
Examination
4-hour written exam:
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer Term
Aids allowed to bring to the exam Limited aids, see the list below and the exam plan/guidelines for further information:
  • Allowed calculators
  • Allowed dictionaries
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Description of the exam procedure
Extra help aids - Notes brought by the examinee: one A4 page of notes
Course content and structure
This course will introduce students to the discipline of financial modeling. The goals of this course are to provide students with an understanding of models used in various areas of finance, and to give them the ability to build and use models themselves.  The course will cover models and financial concepts in the following areas:
  • Time value of money and capital budgeting analysis
  • Corporate cost of capital determination
  • Equity valuation
  • Mean-variance portfolio choice
  • Personal financial planning
  • Fixed-income pricing and the term structure of interest rates
This course will assist students in developing analytical and presentation skills. The course’s Preliminary Assignment will require students to analyze a company’s financial performance by gathering financial statement data and performing ratio analysis. The course’s Mid-term Assignment will require groups to present their valuation analysis of a listed company.

Class Schedule
ClassTopic
Class 1Time value of money, evaluating alternative loan terms, capital budgeting
Class 2Cost of capital, equity risk premium
Class 3Preliminary Assignment, Financial statement modeling
Class held in computer lab.
Class 4Leasing and levered leasing
Class 5Mandatory Mid-term Assignment
Class 6Mean-variance portfolio choice, impact of constraints
Class 7Event Studies
Class held in computer lab.
Class 8Options: Payoffs and profits, Black-Scholes
Class 9Personal financial planning: Saving for retirement
Class held in computer lab.
Class 10Fixed-income: Pricing, duration, term structure models
Class 11Comprehensive Review
Teaching methods
Lectures, based when possible on the analysis of real-world situations. In addition, three classes will be held in a computer lab and will focus on techniques required for effective implementation of models.
Further Information
Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 3 in order to 'jump-start' the learning process.
Expected literature
Required Text: Simon Benninga, Financial Modeling, 4th Ed.2014.  ISBN: 978-0262026284.

Additional Articles: see detailed course outline & article list below.
Last updated on 23-07-2014