Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level with CD ROM (The Wiley Finance Series) (Hardcover)

~ Dr Michael Rees (Author)
Key Phrases: risk modelling, conditional formatting, formula bar, Financial Modelling, Building Blocks, Principles of Modelling (more...)

Editorial Reviews

Product Description

Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level is a practical, comprehensive and in-depth guide to financial modelling designed to cover the modelling issues that are relevant to facilitate the construction of robust and readily understandable models.

Based on the authors extensive experience of building models in business and finance, and of training others how to do so this book starts with a review of Excel functions that are generally most relevant for building intermediate and advanced level models (such as Lookup functions, database and statistical functions and so on).  It then discusses the principles involved in designing, structuring and building relevant, accurate and readily understandable models (including the use of sensitivity analysis techniques) before covering key application areas, such as the modelling of financial statements, of cash flow valuation, risk analysis, options and real options. Finally, the topic of financial modelling using VBA is treated. Practical examples are used throughout and model examples are included in the attached CD-ROM.

Aimed at intermediate and advanced level modellers in Excel who wish to extend and consolidate their knowledge, this book is focused, practical, and application-driven, facilitating knowledge to build or audit a much wider range of financial models.

From the Inside Flap

“A well structured reference. If you are unclear how best to approach a modelling task or you are ready to reconsider some of your modelling habits, this is a useful bag of tricks and thoughts which can greatly simplify your task.”

—Dominik Geller; Head of Corporate Risk Management; F. Hoffmann –La Roche AG

“Michael Rees has written a financial modelling book that is exceptional in its clarity, balance of theory and practice, and its abundance of invaluable examples. Comprehensive and application-driven in its topical coverage, it is one of the very few books that address the modelling process itself. Michael Rees enables even the desperate readers to design, structure and build models appropriate for their situation and provides them with a sound and practical foundation to bring financial modelling to life.”

—Johannes Klose, Principal, Allianz Risk Transfer

“With this outstanding book the reader gets a comprehensive guideline on how to build financial models by showing a path from theoretical approaches to more realistic models. I have never seen such a good explanation of the basic aspects of financial modelling and the presentation of risk modelling including the application of statistical functions. Mike combines visual explanations with mathematical functions and statements where necessary. Supported with a lot of examples this gives the reader a quick understanding of the different topics. The logical development from risk modelling to the analysis of real options is extremely helpful and to my knowledge has never been published in such a form. From my daily practise I would recommend this unique book to every professional or student who is engaged in business modelling and especially interested in risk management.”

—D. Martin Erdmann, Director Risk Management, Infineon Technologies AG

“Michael Rees has hit the nail on the head. In Financial Modelling in Practice, he has addressed many common problems business professionals face in accurately representing their real-life situations as Excel spreadsheets. Modelling is crucial for informed decision-making, as is taking uncertainty and risk into account. Michael Rees addresses these needs in a practical, easily understood way that is both robust and accessible.”

—Randy Heffernan, Vice President, Palisade Corporation

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Product Details

• Hardcover: 288 pages
• Publisher: Wiley; Har/Cdr edition (December 15, 2008)
• Language: English
• ISBN-10: 0470997443
• ISBN-13: 978-0470997444
• Product Dimensions: 9.8 x 6.9 x 0.9 inches
• Shipping Weight: 1.5 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon.com Sales Rank: #118,925 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

6 of 6 people found the following review helpful:

4.0 out of 5 stars goes far beyond standard Excel usage, April 26, 2009

By	W Boudville (Terra, Sol 3) - See all my reviews (TOP 10 REVIEWER)    (REAL NAME)

Rees demonstrates how you can use Excel to perform quite sophisticated modelling. This takes the general ability to define functions and relationships between cells in a spreadsheet and pushes it far beyond simple tabular usages.

Many useful tasks are shown. One example is to perform sensitivity analysis, where you tweak the values or range of values of an input and see the resulting range of output values. This is important, because it lets you get beyond an apparent accuracy in the significant figures of your output. Often, these are just a function of the resolution of the Excel calculator. The book walks thru a sensitivity analysis that lets you see how, with a given model, the output really depends on the input range.

Another important section of the book deals with risk modelling. A stochastic analysis using various important and common probability distributions in your model. This really needs an entire book to itself. But the current discussion is enough for you to start doing nontrivial risk modelling.

3 of 3 people found the following review helpful:

4.0 out of 5 stars How to Rev Up Your Financial Modeling Skills Set, September 7, 2009

By	Serge J. Van Steenkiste (Atlanta, GA) - See all my reviews (REAL NAME)

Michael Rees succeeds to a large extent in his endeavor of writing a text that addresses the financial modeling process instead of Excel functionality, financial theory, or mathematical models. To his credit, Rees has put together a large number of useful modeling examples in the CD-ROM that is sold with the text. Rees' book assumes that readers have at least an intermediate knowledge of both statistical and financial concepts.

After reviewing select Excel functions and tools relevant to financial modeling, Rees gives his audience of modelers many practical tips about how to design, structure, and build models that are relevant, accurate, and easily understandable. Whoever has experience with models will probably agree with Rees when he writes that the majority of models built are in practice of mediocre quality. Someone other than the author of the model will often experience several challenges in dealing with the model at hand, i.e., too much time spent on understanding the model, complexity of the auditing and validating processes, hard to share with others, over-reliance on the original modeler to maintain or use it, lack of clarity of objectives, and presence of errors and implicit assumptions.

Rees then goes into the modeling of financial statements that is often required in the world of corporate finance for forecasting profit and cash, assessing financing requirements, analyzing credit risk and valuation, etc. This chapter is a little gem. It contains many practical tips. Once again, readers will be reminded that there is not always 100% agreement on the definition of some financial concepts.

Rees then uses Palisade Corporation's add-ins @RISK and PrecisionTree for many modeling examples in the two chapters that he dedicates to risk modeling and real option modeling, respectively. Having some understanding of both statistical and financial concepts is particularly important here to benefit from reading both chapters. Probably, many readers with an advanced knowledge of Excel 2007 will regret that the above-mentioned functionality that Palisade Corporation offers has not yet been systematically integrated into at least Microsoft Office Professional.

Finally, Rees discusses the use of Visual Basic for Applications (VBA) in a range of practical financial modeling situations. Rees points out that many otherwise competent modelers never learn VBA. For this reason, Rees makes the assumption that his audience is not very familiar with VBA. Rees shows how macros, i.e., subroutines and user-defined functions, can be used in a variety of modeling contexts.

In conclusion, Rees has made a valuable contribution to the field of financial modeling. The CD-ROM that is sold with the text plays a key role in achieving this objective.