The Oxford Guide to Financial Modeling: Applications for Capital Markets, Corporate Finance, Risk Management and Financial Institutions [Hardcover]

Thomas S. Y. Ho (Author), Sang Bin Lee (Author)

Book Description

ISBN-10: 019516962X | ISBN-13: 978-0195169621 | Publication Date: January 15, 2004 | Edition: First Edition

The essential premise of this book is that theory and practice are equally important in describing financial modeling. In it the authors try to strike a balance in their discussions between theories that provide foundations for financial models and the institutional details that provide the context for applications of the models. The book presents the financial models of stock and bond options, exotic options, investment grade and high-yield bonds, convertible bonds, mortgage-backed securities, liabilities of financial institutions -- the business model and the corporate model. It also describes the applications of the models to corporate finance. Furthermore, it relates the models to financial statements, risk management for an enterprise, and asset/liability management with illiquid instruments. The financial models are progressively presented from option pricing in the securities markets to firm valuation in corporate finance, following a format to emphasize the three aspects of a model: the set of assumptions, the model specification, and the model applications. Generally, financial modeling books segment the world of finance as "investments," "financial institutions," "corporate finance," and "securities analysis," and in so doing they rarely emphasize the relationships between the subjects. This unique book successfully ties the thought processes and applications of the financial models together and describes them as one process that provides business solutions. Created as a companion website to the book readers can visit www.thomasho.com to gain deeper understanding of the book's financial models. Interested readers can build and test the models described in the book using Excel, and they can submit their models to the site. Readers can also use the site's forum to discuss the models and can browse server based models to gain insights into the applications of the models. For those using the book in meetings or class settings the site provides Power Point descriptions of the chapters. Students can use available question banks on the chapters for studying.

Editorial Reviews

Review

"This book showcases Dr. Ho's tireless journey into the frontier of finance over the years. It clearly demonstrates how various rigorous financial models can be practically incorporated into companies' strategic decision making and enterprise risk management. The book challenges our conventional thinking in capital structure theory, interest rate behavior and default risk pricing. It should provoke debate for many years to come." --Tony Kao, Managing Director, Global Fixed Income, General Motors Asset Management

"I think this is a terrific book and a great project. No one has yet done anything quite like it."--Andrew Lo, MIT

"This book is a 'tour de force of finance.' It is comprehensive. It is fundamental; yet it is applied. To call it a "guide to financial modeling," is an understatement. It is much more. The book develops and explains all the models used in finance - from the present value model, to the CAPM, to interest rate models, to option models - and applies these models to important business problems. The emphasis is on finance issues and how models can solve them rather than on the models alone. No work has so ably integrated the fields of corporate finance, derivatives, fixed income and accounting. The book contains many new ideas and insights, not the least of which is a new approach to enterprise valuation and risk management. Every student of finance and every financial manager will benefit from this work."--Hans R. Stoll, The Anne Marie and Thomas B. Walker Professor of Finance, Owen Graduate School of Management, Vanderbilt University

"I strongly recommend The Oxford Guide to Financial Modeling to research minded practitioners as well as to students of finance. Ho and Lee present the essential financial models, including many freshly minted models, in a uniquely cohesive framework that exposes the fundamental link between capital markets and corporate finance. Moreover, it is a terrific reference source for both quants and dilequants."-- Journal of Investment Management

About the Author

Thomas S.Y. Ho,is president of Thomas Ho Company. Previously he was Executive Vice President of BARRA, Inc. He founded GAT, a financial software company that had over 200 institutional clients globally. He served as a professor in finance at New York University's Stern School of Business. He is an associate editor of the Journal of Investment Management, International Journal of Theoretical and Applied Finance, and Journal of Derivatives. He received his Ph.D. in Mathematics from the University of Pennsylvania. Sang Bin Lee, is a professor of finance at the School of Busines Administration, Hangyang University in Seoul, Korea and President of the Korean Securities Association. Previously, he was an assistant director Ministry of Finance, Korea and an Independent Director and a member of Risk Management Committee, Hana Bank. Currently, he serves as a member of Primary Dealers Screening Committee, Ministry of Finance, Korea and a member of Unfair Trading Examination Committee, Financial Supervisory Service, Korea. Professor Lee received his Ph.D. in Finance from New York University's Stern School of Business. Dr. Ho and Professor Lee have published extensively in major journals. They are the authors of the Ho-Lee Model, the first and widely cited arbitrage-free interest rate model.

Product Details

• Hardcover: 735 pages
• Publisher: Oxford University Press, USA; First Edition edition (January 15, 2004)
• Language: English
• ISBN-10: 019516962X
• ISBN-13: 978-0195169621
• Product Dimensions: 10 x 7.1 x 1.8 inches
• Shipping Weight: 3.4 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (8 customer reviews)
• Amazon Best Sellers Rank: #356,228 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

11 of 14 people found the following review helpful:

5.0 out of 5 stars Brilliant educational project, April 4, 2004

By 

Lars Söderlind (Stockholm, Sweden) - See all my reviews

This review is from: The Oxford Guide to Financial Modeling: Applications for Capital Markets, Corporate Finance, Risk Management and Financial Institutions (Hardcover)

Most textbooks on financial modeling are devoted to describing specific models, such as those for stocks, bonds, or options, or to their specific applications such as arbitrage trading and portfolio management. Few books describe the financial principles behind the models and tie the models to business solutions.

The Oxford Guide to Financial Modeling by Thomas S.Y. Ho and Sang Bin Lee (yes, the authors of the Ho-Lee model, the first arbitrage-free interest rate model) successfully ties the thought processes and applications of the financial models together and describes them as one process which provides business solutions. The authors very ably explain all the models used in finance, take the financial theory and modeling to the next level and develop a business model framework that integrate the fields of corporate finance, fixed income, derivatives, and Asset & Liability management.

Each chapter begins by introducing a practical problem. The financial models that provide solutions to the problem are then described. The chapter concludes with how the models can be applied. Because of the nature of the material on financial models, the book presents many results as mathematical formulations, yet the text is very enjoyable as the more rigorous mathematical derivations are deferred to the appendices and to the epilogue.

What really makes The Oxford Guide to Financial Modeling a brilliant educational project and just not another excellent textbook is the companion web site that serves as an interactive workbook designed specifically for the book. The site is designed to further enhance understanding of the use and applications of the models referred to in the book and it is accessible free of charge.

4.0 out of 5 stars The lattice pricing sections are excellent, November 26, 2011

By 

Ian Kaplan (Livermore, CA) - See all my reviews
(REAL NAME)   

This review is from: The Oxford Guide to Financial Modeling: Applications for Capital Markets, Corporate Finance, Risk Management and Financial Institutions (Hardcover)

The reviews of this book seem to fall into two categories: those that are suspect and those that are harsh. I have at least another partial perspective to contribute.

I don't own this book. I am in a computational finance masters degree program and I spend a lot of money on books as it is. But I would definitely consider buying this book. I recently had to solve a homework problem on using lattice pricing to price a "Chooser option" (sometimes called an as-you-like-it option). This option can be converted to a put or a call at some time T. I wrote software that properly generated the strike price, and the call and put prices in the lattice. But I was not sure what the next step was. This book has an very readable very good section on lattice pricing of Chooser options. After reading this I was able to finish the software and get the right answer. Google limits the amount that you can see, but looking over other material it looks like there are other excellent sections on lattice pricing for other instruments.

So having read through some of this book I can attest that at least some sections are excellent. Fortunately you can take a look at the book, either on Amazon or Google and decide for yourself.

7 of 11 people found the following review helpful:

5.0 out of 5 stars The New Bible of Financial Market, April 1, 2004

By 

James Dong (New York) - See all my reviews
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This review is from: The Oxford Guide to Financial Modeling: Applications for Capital Markets, Corporate Finance, Risk Management and Financial Institutions (Hardcover)

I got this book about a week ago. What a treat! This book gives comprehensive and in-depth descriptions on a variety of most popular topics: financial modeling, valuing different financial instruments, US and international financial market structures, trading strategies, and many more. I think due to authors' math background, sophiscated math finance students like me find this book even more intriguing -- we can actually see how mathematic theories are applied in the market to price different exotic instruments. Yet this book is also written simple enough so MBA students (or even advanced college students) can gain comprehensive knowledge of how financial market really works.

Also, don't forget to check out this book's website. It contains all the models discussed in the book. Everything is already coded in excel and vb, and ready to use. Best of all, it is FREE!