Mastering Financial Mathematics in Microsoft Excel A practical guide to business calculations

by Day, Alastair

• ISBN13: 9781292067506
• ISBN10: 1292067500
• Edition: 3rd
• Format: Paperback
• Copyright: 2015-09-24
• Publisher: FT Press

Summary

Fully updated and compliant with Excel 2013, this clearly explains the basic calculations for mathematical finance, backed up with simple templates for further use and development, and a workbook with exercises and solutions at the end of each chapter. The examples used are relevant to both managers and students in the UK and overseas.

 

New to this edition

• Updated glossary of key terms
• Functions list in English and Euro languages
• Continuity check on all formats, layouts and charts
• More worked examples
• Additional exercises at the end of each chapter to help build models
• Templates and models available online

Author Biography

Alastair Day has worked in the finance industry for 20 years in treasury and marketing functions. Alastair has a degree in Economics and German from London University, an MBA from the Open University Business School, and is an associate lecturer in corporate finance with the OUBS.

Table of Contents

Acknowledgements  

About the author   

Conventions   

Overview  

Warranty and disclaimer  

 

1 Introduction   

Overview   

Common Excel errors  

Systematic design method  

Auditing  

Summary   

 

2 Basic financial arithmetic

Simple interest  

Compound interest

Nominal and effective rates  

Continuous discounting   

Conversions and comparisons  

Exercise  

Summary   

 

3 Cash flows

Net present value   

Internal rate of return   

XNPV and XIRR

XNPV periodic example

Modified internal rate of return   

Exercise  

Summary  

  

4 Bonds calculations   

Description

Cash flows

Zero coupons   

Yield

Yield to call   

Price and yield relationship   

Yield curve pricing

Other yield measures

Yield measures

Exercise  

Summary  

  

5 Bonds risks   

Risks

Duration  

Convexity  

Comparison   

Exercise  

Summary

6 Floating rate securities  

Floating rates

Characteristics of interest rate securities  

Yield evaluation  

Coupon stripping

Exercise  

Summary

7 Amortization and depreciation

Amortization

Full amortization

Delayed payments  

Sum of digits

Straight line and declining balance depreciation  

UK declining balance method  

Double declining balance depreciation

French depreciation   

Exercise  

Summary

8 Swaps  

Definitions

How swaps save money  

Advantages of swaps   

Terminating interest rate swaps   

Implicit credit risk  

Worked single currency swap  

Valuation   

Cross currency swap

Worked example

Swaptions   

Exercise  

Summary   

 

9 Forward interest rates  

Definitions

Example forward rates

Hedging principles

Forward rate agreement   

Yield curves  

Exercise  

Summary  

  

10   Futures   

Futures market

Terminology  

Benefits   

Clearinghouse operation  

Bond futures

Hedging mechanisms   

Hedging example one   

Hedging example two   

Exercise  

Summary   

 

11   Foreign exchange

Risk   

Spot rates   

Longer dates  

Equivalence  

Comparisons and arbitrage

Exercise  

Summary

12   Options   

Description

Terminology  

Underlying asset  

Call options   

Put options

Example  

Covered call  

Insurance using a stock and a long put

Pricing models  

Black Scholes model

Call put parity  

Greeks  

Binomial models

Comparison to Black Scholes   

Exercise  

Summary

13   Real options

Real options  

Black Scholes model

Binomial model   

Exercise  

Summary

14   Valuation  

Valuation methods

Assets   

Market methods  

Multi-period dividend discount models   

Free cash flow valuation

Adjusted present value

Economic profit  

Exercise  

Summary

15   Leasing   

Economics of leasing   

Interest rates  

Classification   

Amortization

Accounting

Settlements

Lessor evaluation   

Lessee evaluation   

Exercise  

Summary  

  

16   Basic statistics

Methods  

Descriptive statistics  

Probability distributions  

Sampling/Central Limit Theorem

Hypothesis testing  

Correlation and regression  

LINEST function

Exercise  

Summary

Appendices   

1 Exercise answers, functions list, software installation and licence

2 Microsoft^® Office Menus 

 

Index