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2017/2018  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
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 120
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Course instructor - Dr Hassan Tanha, Victoria University, ht.acc@cbs.dk
    Sven Bislev - Department of Management, Society and Communication (MSC)
In case of any academic questions related to the course, please contact the course instructor or the academic director, Sven Bislev at sb.msc@cbs.dk
Main academic disciplines
  • Finance
Last updated on 25/04/2018

Relevant links
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Calculate time value of money, and use capital budgeting
  • Produce a portfolio analysis, capital asset pricing model (CAPM) and the security market line (SML)
  • Work with valuation: Bonds and Stocks
  • Analyse options: Strategies and pricing (Black-Scholes and Binomial)
Course prerequisites
At least one Introductory course in finance (It is essential to be familiar with time value of money, NPV,IRR and also the basics of the capital asset pricing model- CAPM,SML,beta) plus an introductory course in financial accounting and a basic knowledge of Excel.
Examination
Undergraduate Financial Modeling:
Exam ECTS 7.5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: 31 July - 3 August 2018

Retake exam: September - October 2018

3rd attempt (2nd retake) exam: November - December 2018

Exam schedule is available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams.
Aids Limited aids, see the list below:
The student is allowed to bring
  • Any calculator
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
At all written sit-in exams the student has access to the basic IT application package (Microsoft Office (minus Excel), digital pen and paper, 7-zip file manager, Adobe Acrobat, Texlive, VLC player, Windows Media Player). PLEASE NOTE: Students are not allowed to communicate with others during the exam : Read more about exam aids and IT application packages here
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.
4 hour written sit-in exam, new exam question
Exam form for 3rd attempt (2nd retake): home project assignment, max. 15 pages.
Course content and structure

In this class you will learn to implement in Excel using Data Tables and many Excel financial functions the financial concepts. These concepts include: 
-Capital budgeting and time value of money 
-Corporate, bonds and stock valuation models: 
-Portfolio analysis, capital asset pricing model (CAPM) and the security market line (SML) 
-Using portfolio data downloaded from the Web 
-Measuring investment performance 
-Options: strategies and pricing
The combination of Excel and finance is a necessity for students wishing to enter the finance job market! This course combines the basic theory of finance with intensive implementation of all concepts in Excel. The result is that you will better understand the financial theory and (of course) will come out equipped with Excel skills.

 

Preliminary assignment

Class 1: Class 1: Background to Excel: In-class discussion of Data Tables, very basic VBA, and Excel’s personal notebook (PFE, Chapters24- 29). Time value of money (PFE, Chapter 2)

Class 2: Time value of money (PFE, Chapters 2, 3)

Class 3: Capital budgeting (PFE, Chapters 4, 5 and 6)

Class 4: Free cash flows, simplified valuation model, financial modelling - valuing a company with Yahoo data (PFE, Chapter 7)

Class 5: Introduction to risk, portfolio mathematics, and portfolio returns and the efficient frontier (PFE, Chapters 8, 9, 10)

Class 6: Capital asset pricing model (CAPM), measuring investment performance (SML), and SML and the cost of capital (PFE, Chapters 11, 12 and 13)  

Feedback activity

Class 7: Bond Valuation: Treasury Bills, Treasury Bonds, yield curve, YTM, callable bonds and preferred stocks (PFE, Chapter 15).

Class 8: Valuing Stocks: Discounted cash flows, free cash flows (FCF)• Cost of capital, cost of equity, cost of debt, weighted average cost of capital (WACC) • Equity premium • Beta, equity beta, asset beta • Two-stage growth models (PFE, Chapter 16).

Class 9: Options:  concepts (cash flows of options; option strategies); Option pricing restrictions:  No early exercise of calls; Put-call parity; Early exercise of American puts; Option price convexity (PFE, Chapters 20, 21).  

Class 10: Black-Scholes formula Stock price volatility; Implied volatility (Chapter 22)

Class 11: Binomial model and replicating portfolio (chapter 23)  
Comprehensive Review
Teaching methods
I teach interactively—a combination of lecture, theory of finance, Excel. I expect students to follow along with my lectures, implementing in Excel the models that are explained in class.
Feedback during the teaching period
TBA
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
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 1 in order to 'jump-start' the learning process.

 

Course timetable is available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams.

 

We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams end February 2018 at the latest.
Expected literature

Mandatory readings:

 

Textbook: Principles of Finance with Excel (2nd edition) by Simon Benninga, Oxford University Press. In the class schedule, this book is referred to as PFE.
Last updated on 25/04/2018