Workshop on Mastering financial modeling

MASTERING

MMMASTERIN

G

FINANCIAL MODELING

4 DAY WORKSHOP

ADVANCED LEVEL

In association with

MASTERING FINANCIAL MODELING ADVANCED LEVEL 4th - 7th October, 2010 : Mumbai | 6th - 9th December, 2010 : Delhi, Ahmedabad

13th -16th December, 2010 : Bangalore, Mumbai

Program Fee: INR 24,000 /- + 10.3% ST

Mastering Financial Modeling (MFM©) is a comprehensive financial modeling workshop which covers the

practical requirement that a finance professional is expected to do in areas related to Financial Modeling. Excel

sheet is a predominant tool used in Modeling and the program shall cover its relevant usage in detail. The

workshop has 32 classroom contact hours spanning four days from 8 am to 6 pm. Objective of this program is

to build fundamental concepts on financial modeling and provide them techniques to build financial model

needed by their organisation.

ABOUT THE PROGRAM

MFM©

starts with a 2 day basic program on financial modeling which explains about all the excel based

financial modeling required by finance professional working in any sector. The latter 2 days goes in depth into

the derivative solutions and its analysis and financial engineering models including the concepts of financial

mathematics.

Day 1-2: FINANCIAL MODELING WITH EXCEL (2 Days)

It is a generic program catering to the needs of all corporate professionals working in any sector. This program

will take an individual from basic to an intermediate level.

Pre Requisite: None Day 3-4: MODELING AND ANALYSING DERIVATIVES USING EXCEL (2 Days)

This is a niche financial modeling program which caters to only those working in derivatives and financial

engineering.

Pre-Requisite: It is expected participants should have an understanding of excel based financial modeling and working knowledge of derivatives.

Based on the need, you can enroll for entire 4 day program (MFM©) or for any of the two day program –

Day 1-2: FINANCIAL MODELING WITH EXCEL (2 Days) or Day 3-4: MODELING AND ANALYSING

DERIVATIVES USING EXCEL (2 Days)

HOW THE WORKSHOP WAS SHAPED

Some of the research and data points we have used in shaping the agenda include:

1. Talking to Senior business and Finance management group, Financial consultants and analysts in the private

and public sectors and seeking their views and advice on what are the critical issues in Financial Modeling

and where they are investing budget.

2. Seeking the views of thought leaders, industry analysts and leading consultants to mould the agenda.

3. OptiRisk is in a unique position as a major part of our business is also training - which includes large

portfolio of public and closed in-house courses – from this we track which courses are generating most

participation and importantly again, where organisations are investing budget. Training is an excellent

barometer to market trends.

We believe that this is the most focused of any Financial Modeling workshop in India.

FINANCIAL

MODELING WITH EXCEL

2 DAY WORKSHOP

FINANCIAL MODELING WITH EXCEL 4th & 5th October, 2010 : Mumbai

6th & 7th December, 2010 : Delhi, Ahmedabad

13th & 14th December, 2010 : Bangalore, Mumbai


PROGRAM OBJECTIVE

MS Excel ® is today unarguably the most commonly used spreadsheet utility globally to do finance. In spite of

this, according to various surveys on Excel usage, a rather miniscule percentage of Excel Users use it to its full

potential. The focus of the course is to help the participants learn the tools and capabilities of this spreadsheet

application to perform from the simplest to the most complicated and elaborate financial analysis.

Modelling for Corporate Finance Transaction

Case Outline and the process participants will go through in solving the case and structuring an LBO/MBO

transaction

Acquirer input

historical

numbers and

projected

numbers/

assumptions.

Acquirer

output:

Income

statement,

balance sheet

and cash flow

Acquirer

DCF valuation

output

How the

LBO/MBO

would be

funded. How

much debt

needs to be

raised

Structuring the

Deal

Evaluating

Different

Options

Motivations &

Economics of

deal for

Debt/Hybrid/E

quity Investors

Sources of

Funds:

Financial

Sponsors

Management

Different Tiers

of debt

FINANCIAL MODELING WITH EXCEL The good thing about an over-engineered software like Excel is that it very well equiped to perform the most

sophisticated and detailed financial analysis. The downside to this is that financial analysis workbooks are

becoming increasingly bulky and unstructured. Many a times, they develop into unweildy, clumsy and difficult

to manage models, with the user having no clue as to what’s going in the spreadsheet and if the results are

accurate in the first place. Therefore, structuring good financial models is as much an art as a science.

The important aspects this workshop focuses on is to apply the tools effectively while constructing financial

models, caring for scalability, making them flexibile, structuring in such a way that auditing the model results is

not cumbersome. These essential attributes make financial models accurate, flexible and user-friendly. The

workshop would use a ‘learning by doing’ approach, because that’s how the science and art of financial

modeling is learnt.

Results:

We expect that the participants attending the course will be able to learn significant financial modeling

capabilities using Excel that would be pertinent for corporate finance, financial analysis, risk management,

transaction structuring like modeling for M&A, etc. The level of the course is Intermediate to advanced.

KEY BENEFITS

- Master the use of Excel’s financial modelling tools

and capabilities

- How to design a model to suit your purpose

- Understand the different types of financial models

and when each should be applied

- Construct financial models making use of a broad

range of Excel methods and techniques

- Accurate forecasting corporate cash flows for project

finance deals and structures

- Incorporate elements such as risk, sensitivity,

optimisation and forecasting into financial models

- Produce meaningful management reports and charts

for communication

- How to identify and control key sensitivities through

advanced spreadsheet simulation

- How to design a model to maximise flexibility and

reliability

- Practical tips for checking and debugging the mode

Creating the first financial statement model in Excel to

begin with (with an exercise and hands on practical

session; focus on how to build a model right from the

scratch, linkages with excel spread sheets, assumptions,

use of past financial statements for the projections and

building forecasted financial statements)

Important issues for preparation and building of a financial

model

Excel Functions and commands to supercharge worksheets

(most of the participants may be aware about the

functions, yet just a quick revision and how these functions

are used in financial modelling)

Different ways of summing and counting: SUMIF;

SUMIFS; SUMPRODUCT; DSUM; DCOUNT;

DCOUNTA; COUNTBLANK; COUNTIF; DMAX;

DAVERAGE

IF (This Is True, Do This, Else Do This)

Lookup & reference: CHOOSE; OFFSET; INDEX;

MATCH; HLOOKUP; VLOOKUP

Data Analysis Toolpak

Important Excel Functions and commands for

modeling

Conditional Formating

Online collaboration

Auditing

Protecting the workbook

Sharing the workbook

Data Validation

Handling external data

Sorting

Filters

Subtotals

Pivot Tables

Statistical Data Analysis: trend analysis, regression,

moving average

Optimisation using

Goal Seek

Scenario Manager

Data Table: Row and Column input cell

Solver

FINANCIAL MODELING WITH EXCEL

PROGRAM FACULTY

Our faculty is an experienced Investment Banker and a guest faculty in finance in IIMs, who specializes in Fixed

Income, Foreign Exchange and Credit Derivative products. He has conducted training programs for banks and

corporates in India, Singapore, Hong Kong, Middle East, and South Africa on topics such as Credit Derivatives,

Fx Derivatives, FI Derivatives, ALM, M&A, Financial Modeling for LBOs, Debt Capital Markets, Basel II and Risk

Management.

WHO SHOULD ATTENTD

Corporate Finance Professionals

Quantitative analysts

Investment Bankers

Risk professionals

Treasury managers

Controllers

Data analysts and economists

DAY ONE

FINANCIAL MODELING WITH EXCEL

DAY ONE (Cont.)

Scenario Building

Switches

Forms

Scenario building optimistic, base case and pessimistic assumptions

DAY TWO

Topics in Finance

Principles of financial modelling—Accuracy, Flexibility

& User-friendliness

Defining Model objective

Outlining model plan

Spread sheet maps

Flowchart and information flow

Layout and architecture of financial model

Setting up modules

Identifying inputs and variables

Defining deliverables and functionality

Cataloguing outputs

Stress testing Models

Model Documentation

Financial Statement modelling

Projection of Revenues, COGS, SG&A and other Income

Statement and Balance Sheet items

Select model drivers and assumptions

How to create an interlinked model for Income

Statement and Balance Sheet

How circularity improves accuracy but also destabilizes

the model

Building a fully integrated Cash Flow Statement

Modelling need for financing in future time

Analysing the output and cross-checking with surplus

funds and necessary to finance

Models for Debt repayment with prepayment option

Modelling Amortizing & Accreting Loans

Modelling Pay In Kind (PIK) securities

Model for computing Beta

Modelling un-levering and re-levering of betas

Modelling term structure of Beta

Model for WaCC with various debt-equity choices

Modelling term structure of WaCC

DCF valuation

Relative valuation (PE, EBITDA multiple)

Combining DCF and relative valuation models

Modelling for Leveraged Buy Out & Management Buy

Out

Sources of funds for acquisition

Modelling uses of funds

Modelling ESOPs and Earn-Outs

Partial and full dilution due to ESOPs

IRR calculation for financial sponsor on fully diluted

basis

Purchase Accounting Model

Model for Stock-for-Stock Deal

Model for Cash-for-Stock Deal

Modelling when M&A financed by issue of debt

Model illustrating Accounting for a partial Acquisition

Accretion Dilution Model

Deal Structure: Cash, Fixed-Value Stock Offer, Fixed-

Shares Stock Offer

MODELING AND ANALYSING

DERIVATIVES USING EXCEL

2 DAY WORKSHOP

MODELING AND ANALYSING DERIVATIVES USING EXCEL 6th & 7th October, 2010 : Mumbai

8th & 9th December, 2010 : Delhi, Ahmedabad

15th & 16th December, 2010 : Bangalore, Mumbai


PROGRAM OBJECTIVE

A common misconception is that understanding derivatives requires knowing a lot of advanced math

which is the privilege of only the geeks. That said, sometimes you probably wonder how do these large bunch of

I-Bankers manage to provide derivative solutions to their clients because they don’t seem to have been rocket

scientists in their previous avatar. There would have also been questions like how do you actually engineer

those financial products? May be, you read something called Black Scholes, Ito’s Lemma, and so on but they

didn’t quite answer those questions convincingly, much less, make sense in the context of the real world of

finance.

In the last two decades, derivatives have become all-pervading in financial markets with outstanding

notionals in excess of US$ 600 trillion. If your profession has anything to do with finance, then there is a pretty

high chance that you will have something to do with derivatives at some point or the other. This course tries to

demystify and simplify derivatives using a tool like Excel. For a practioner, it may be difficult to relate the Black-

Scholes equation but it would probably start to make sense once you start thinking like an accountant about all

these greeks and put the differential equations in excel. In the workshop, we will start to think of each of these

greeks in terms of money, which is what traders do. The program covers a comprehensive list of topics that

derivative practioners need to understand for their day-to-day work.

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Understand financial engineering specifically, how

derivative structures are engineered

Pricing and risk management of Equity, FX, Interest

Rate and Credit Derivatives

Demystify and simplify the quantitative techniques in

analysing derivatives using Excel

Be aware of derivatives as risk management tools

Learn how to manage a derivative portfolio

Appreciate how derivatives are structured to suit

client requirements

Learn simulation techniques for pricing derivatives

Learn how to solve any stochastic partial deferential

equation (including Black Scholes equation) using

spreadsheets

Understand Greeks (Delta, Gamma, Vega & Theta)

and the monetary implications of each of them

MODELING AND ANALYSING DERIVATIVES USING EXCEL

PROGRAM FACULTY

Our faculty is an experienced Investment Banker and a guest faculty in finance in IIMs, who specializes in Fixed

Income, Foreign Exchange and Credit Derivative products. He has conducted training programs for banks and

corporates in India, Singapore, Hong Kong, Middle East, and South Africa on topics such as Credit Derivatives,

Fx Derivatives, FI Derivatives, ALM, M&A, Financial Modeling for LBOs, Debt Capital Markets, Basel II and Risk

Management.

WHO SHOULD ATTENTD

Capital Market Professionals

Quantitative analysts

Investment Bankers

Risk professionals

Treasury managers

Controllers

Economists

KEY BENEFITS


DAY ONE

Geometric Brownian Motion

Financial variables with deterministic Jump and

stochastic jumps

Taylor series

Our first differential equation

Binomial Model

Binomial model for an asset price random walk

delta hedging

no arbitrage

the basics of the binomial method for valuing options

risk neutrality

Pricing exercises using Binomial model

Simulating and Manipulating Stochastic Differential

Equations

Using Ito’s lemma to manipulate stochastic

differential equations

Continuous-time stochastic differential equations as

discrete time processes

Simple ways of generating random numbers in Excel

Correlated random walks

Monte Carlo Simulation and Related Methods

the relationship between option values and

expectations

how to do Monte Carlo simulations to calculate

derivative prices

simulations in many dimensions using Cholesky

factorization

The Black–Scholes Model

the foundations of derivatives theory: delta hedging

and no arbitrage

multiple ways of deriving the Black–Scholes partial

differential equation

the assumptions that go into the Black–Scholes

equation

how to modify the equation for commodity and

currency options

Replication of price of a derivative product in general

is the cost of risk managing it

Excel Exercise using a Partial Differential Equation

Discrete Hedging

the effect of hedging at discrete times

hedging error

the real distribution of profit and loss

Pricing exercises

Equity Derivative Products

Vanilla Options

Call/Put Options

Contract specifications of Call/Put Options

Exercise: Pricing with Black Scholes Model and

Monte Carlo Simulation in Excel

Basic strategies containing vanilla options

Call and put spread

Risk reversal

Risk reversal flip

Straddle

Strangle

Butterfly

Seagull


DAY TWO

Fx Derivatives and Interest Rate Derivatives

Fx Forwards, Fx Swaps

When to use an FX forward, Fx Swap

Pricing & Hedging Examples

Fx Structuring Exercise in Excel: Corporate Client

Fx Structuring Exercise: Cross border acquisition

Interest Rate Swaps

LIBOR Swaps

MIBOR Swaps

OIS Swaps

Basis Swaps

Cross Currency Swaps

Standard CCS with principal exchange

PO Swaps

CO Swaps

Interest Rate Options

Receiver and Payer Swaptions

Caps and Floors

Callable & Puttable Bonds

CO Swaps

Interest Rate Options

Receiver and Payer Swaptions

Caps and Floors

Callable & Puttable Bonds

Credit Derivatives

Credit Default Swap Pricing

Pricing First-to-default Basket

Copula Models for pricing credit derivatives: Gaussian

Copula

Pricing CDO

Risk management of Derivatives

Value at Risk

VAR as Downside Risk

VAR Parameters: Confidence Level, Horizon,

Application: The Basel Rules

VAR Methods

Counterparty Credit Risk for Derivative Transactions

Counterparty-level exposure

Credit Value Adjustment (CVA)

CVA as the price of counterparty credit risk

Expected Exposure - Conditional on Default

Peak Exposure - Conditional on Default

Wrong/Right-Way Risk

MumbaiBangalore

13th - 16th Dec,10

15th & 16th Dec,10

13th & 14th Dec,10

6th - 9th Dec, 2010

8th & 9th Dec, 2010

6th & 7th Dec, 2010

Delhi

4th - 7th Oct, 2010

6th & 7th Oct, 2010

4th & 5th Oct, 2010

Excel (2 Days)Modeling & Analysing Derivatives Using

Rs 24,000/(Certificate of Participation from Carisma Brunel University London)

Both (4 Days)

(2 Days)With ExcelFinancial Modeling

#501, Block :10,

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Modelling Applications is an interdisciplinary research centre which

is supported by the strategic research initiative of Brunel University.

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Workshop on Mastering financial modeling