- Hardcover: 1168 pages
- Publisher: The MIT Press; third edition edition (January 8, 2008)
- Language: English
- ISBN-10: 0262026287
- ISBN-13: 978-0262026284
- Product Dimensions: 7 x 1.6 x 9 inches
- Shipping Weight: 3.8 pounds
- Average Customer Review: 4.5 out of 5 stars See all reviews (158 customer reviews)
- Amazon Best Sellers Rank: #258,476 in Books (See Top 100 in Books)
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Financial Modeling third edition Edition
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"Financial Modeling by Simon Benninga is an outstanding resource for teaching the essentials of finance to both undergraduates and masters students. It is comprehensive, lucid, and a highly useful resource in every financial modeler's toolkit."--Richard W. Roll, Professor of Management, and Japan Alumni Chair in International Finance
"I've learned a great deal from the first two editions of Simon Benninga's Financial Modeling, and the Third Edition offers both new topics and updated coverage of topics from earlier editions. The book gives clear, well-illustrated instructions for using Excel software to solve finance problems, ranging from basic to highly sophisticated, in both corporate finance and investments. The many excellent examples draw on actual company data, and the book gives useful tips on obtaining current data from the internet. Financial Modeling is an outstanding resource for finance professionals, instructors and students. As with earlier editions, I plan to keep my copy close at hand."--Robert A. Taggart, Professor of Finance, Carroll School of Management, Boston College(Robert Taggert)
"The new edition of Simon Benninga's Financial Modeling is a comprehensive and effective learning-by-doing tool in motivating users and making easily accessible the concepts of modern corporate finance, investments, and derivatives. In the real world of finance, its clear step-by-step approach empowers the practitioner to search the internet for financial data, build programs to analyze them, and make sound financial decisions. I strongly recommend it to the finance student and practitioner alike."--George Constantinides, Leo Melamed Professor of Finance, The University of Chicago Graduate School of Business(George M. Constantinides)
For the 2nd Edition: "Benninga has a clear writing style and uses numerous illustrations, which make this book one of the best texts on using Excel for finance that I've seen." Ed McCarthy Ticker Magazine
For the 2nd Edition: "The author describes this as a 'cookbook' and that is a good analogy.... Its breadth is extensive, covering simple present valuing and cost of capital... to the likes of real options and early exercise of American-style options.... A worthwhile acquisition." Paul Dentskevitch Risk Magazine
For the 2nd Edition: " Financial Modeling belongs on the desk of every finance professional. Its no-nonsense, hands-on approach makes it an indispensable tool."Hal R. Varian , Dean, School of Information Management and Systems, University of California, Berkeley
For the 2nd Edition: "This is applied finance theory for the professional at its best. As a student, I and countless others learnt the intricacies of Lotus and financial theory from Professor Benninga"s first book -- Numerical Techniques in Finance. Now, as a professional, I do not have to "re-invent the wheel" in Excel. An invaluable guide. A must for all financial analysts."Vikas Nath , Global Strategist, Emerging Equity Markets, Union Bank of Switzerland, London
"I"ve learned a great deal from the first two editions of Simon Benninga"s Financial Modeling, and the Third Edition offers both new topics and updated coverage of topics from earlier editions. The book gives clear, well-illustrated instructions for using Excel software to solve finance problems, ranging from basic to highly sophisticated, in both corporate finance and investments. The many excellent examples draw on actual company data, and the book gives useful tips on obtaining current data from the Internet. Financial Modeling is an outstanding resource for finance professionals, instructors and students. As with earlier editions, I plan to keep my copy close at hand."Robert A. Taggart , Professor of Finance, Carroll School of Management, Boston College
"The new edition of Simon Begginga"s Financial Modeling is a comprehensive and effective learning-by-doing tool in motivating users and making easily accessible the concepts of modern corporate finance, investments, and derivatives. In the real world of finance, its clear step-by-step approach empowers the practitioner to search the Internet for financial data, build programs to analyze them, and make sound financial decisions. I strongly recommend it to the finance student and practitioner alike."George Constantinides , Leo Melamed Professor of Finance, The University of Chicago Graduate School of Business
About the Author
Simon Benninga is Professor of Finance and Director of the Sofaer International MBA program at the Faculty of Management at Tel-Aviv University. For many years he was a Visiting Professor at the Wharton School of the University of Pennsylvania.
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Top Customer Reviews
The inadequacies that limit my assessment to four stars and need to be addressed in the third edition are: 1) frustrating errors in the text and models, for which the errata sheet and corrected models (available at: [...] only improve, but do not heal. My students find new, undocumented, errors each semester. 2) the data sets and examples are getting, frankly, a little old. It is the year 2005 as I write this, but the data sets and examples end in 1999, a year in which my current students were in high school. 3) the models, while excellent as introductions to the field, are now at the point of being fundamental, rather than exemplary. This is not Prof. Benninga's fault, but as the other reviews from professionals here attest, Excel modeling has advanced in all fields (option pricing, financial statements, portfolio optimization, bond metrics, etc). When this volume was introduced, it was adequate for helping MBA and Master of Science in Finance students build essential modeling skills. Sadly, it now is only appropriate for raw beginners or undergraduates. A new text with a larger scope that addresses advances in the fields is called for. 4) While it is a subject in itself, the book is seriously hindered by not introducing basic Monte Carlo simulation in Excel. 5) No information on downloading data from BLOOMBERG, REUTERS, and other historical and market data providers. It would add to the scope of the text, but 6) fitting DCF models to yield curves also would be welcome.
Even with these criticisms, Benninga's Financial Modeling remains the best book in the field for what it seeks to accomplish. It covers the major topics of finance that are appropriately addressed with models: financial statement, firm valuation and credit metrics, portfolio construction, fixed income metrics, option pricing, etc. Benninga's FM also compares favorably with his two nearest competitors.
Powel and Baker's "The Art of Spreadsheet Modeling" is a two pronged monster: it seeks to be a meta-level theoretical work on spreadsheet modeling, and then introduces modeling Monte Carlo simulation as a fundamental component of Excel (a student edition of CrystalBall is included in the text, and is the only reason to buy this book). The gap between the two is a Grand Canyon's worth of knowledge space that this text does not fill in and nearly ignores. The student who uses only Powel and Baker is ill served; whereas if he uses Benninga, he knows how, why, when and what to model. Consider Powel & Baker as sketches of a concept car with simulated wind tunnel runs, whereas Benninga shows how to build your own kit car and drive it around. Powel and Baker's concept car is beautiful, advanced, gracious, but doesn't exist and doesn't run; Benninga's kit car is like a Lotus Super Seven: simple, runs, is a blast to drive, but is dangerous in heavy traffic and you would not want to go on a 1,000 mile journey with it (i.e. or build a DCF model for the Goldman Sachs LBO team with only Benninga).
Chandan Sengupta's "Financial Modeling Using Excel and VBA" is the only book that comes close to Benninga, and I recommend it as another perspective for my students who want to continue with financial modeling. However, Sengupta's work is flawed on two counts: 1) it is clear throughout that he had read Benninga, and 2) he dropped much of Benninga's content in favor of adding wordy explanatory paragraphs to soften the blow of the fact that modeling is mathematically and technically both boring and intense work. With those criticisms in mind, his work still has neater, leaner, more compressed models with updated contemporary detail.
There are three other books, Scott Proctor's "Building Financial Models with Microsoft Excel: A Guide for Business Professionals," which focuses on building vanilla financial statements, as does John Tjia "Building Financial Models." Mary Jackson & Mike Staunton's "Advanced Modeling in Finance using Excel and VBA" is also now dated and seriously flawed and limited in scope), however it is the next step following Benninga.
For those working in top-tier banks, the internal training and modeling documents, and examples built by colleagues, will likely surpass by light years what is offered in these books. And so for beginners, Benninga remains the the best choice and first step, until something better comes along, or Benninga himself produces a new edition.
For further information, please use the "Look Inside" feature and examine the Table of Contents carefully, because I will emphasize selected portions.
It is difficult to overstate how useful and practical and helpful this work is for a wide audience and Financial Modelling is the single finance book I recommend for everyone after they have taken (or read themselves) Introductory Finance.
For those looking for "one-stop-shopping" for models that resemble those of professional financial analysts then there is no better value than Benninga's FM3.
Benninga's FM3 is a coal-face work for those who must make financial decisions using models. There are further specialist texts in topics covered here (credit modelling, portfolio construction, option pricing), but the models in FM3 are the first advanced models applied to loans, bonds, options, and equity portfolios. Master these and then specialized texts are easier to digest.
"Cookbook" metaphors are too strong and do not do this work justice, for Financial Modelling 3rd (FM3) is not a mere collection of recipes but rather topical introduction, explanation, and then direct technique.
If we can make a comparison with a "cookbook" then FM3 falls somewhere between "The Joy of Cooking" and "Mastering the Art of French Cooking." "Joy" combines chapters on technique, ingredients, and tools with dense pages of endless recipes, whereas "Mastering" emphasises technique and a few well-selected recipes.
The welcome new chapters cover bank valuation, the Black-Litterman approach to portfolio optimization, and Monte Carlo methods and applications to option pricing, and the previous 2nd edition's small chapter on using array functions and formulas has been expanded. The chapter on data downloads from YAHOO is also welcome, especially for those on a budget.
There is a single significant flaw in the work, which is excusable and redeemable. Far too often the discounting in the chapters is done over a flat interest rate curve. While the term structure of interest rates is covered, and historical term structures and parallel shifts and steepening and flattening is covered in isolation in a thorough chapter and with wonderful data files, the necessity and explicit connection of discounting from an appropriate yield curve is left implied and only mentioned in a few exercises. I would have preferred a "round up" chapter where each of the subjects treated (bond discounting, portfolio expected returns, options, etc.) under a yield curve with advanced models. Sure BLOOMBERG and REUTERS have these sort of things (often incorrectly) programmed, but students need to learn explicitly about them and do the exercise themselves to comprehend the importance of curve discounting.
The CD attached in the back of the book is alone worth the price, with over two score of models that are practical and adaptable for students and professionals alike. The files are stored and separated according to chapters and subject matter. Each file has logical progression of the concepts advanced in the book, and each separate sheet either stands alone or appropriately links to data and models on other sheets, so editing for your own purposes is a breeze.
For those who want to train themselves in Finance (not "personal finance") then I suggest reading Copeland, Weston, & Shastri's Financial Theory and Corporate Policy (4th Edition) and Brealey, Myers, and Marcus's "Corporate Finance" and "Investments" followed by working through FM3. Such a course would give any self-disciplined person the equivalent of a Masters of Science in Finance.
Full disclosure: I am thanked in the "Acknowledgements" for providing a few helpful comments on the second edition.
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