Excel Modeling in Investments, Fifth Edition approaches building and estimating models with Microsoft® Excel®. Students are shown the steps involved in building models, rather than already-completed spreadsheets.
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Excel Modeling in Investments, Fifth Edition approaches building and estimating models with Microsoft® Excel®. Students are shown the steps involved in building models, rather than already-completed spreadsheets.
Fifth Edition Changes vii
Ready-To-Build Spreadsheets vii
What Is Unique About This Book xi
Conventions Used In This Book xii
Craig’s Challenge xiv
Excel® Modeling Books xiv
Suggestions for Faculty Members xiv
Acknowledgements xv
About The Author xvi
PART 1 BONDS / FIXED INCOME SECURITIES 1
Chapter 1 Bond Pricing 1
1.1 Annual Payments 1
1.2 EAR, APR, and Foreign Currencies 2
1.3 Duration and Convexity 7
1.4 Price Sensitivity 9
1.5 Immunization 11
1.6 System of Five Bond Variables 17
Problems 18
Chapter 2 The Yield Curve 21
2.1 Obtaining It From Treasury Bills and Strips 21
2.2 Using It To Price A Coupon Bond 22
2.3 Using It To Determine Forward Rates 23
Problems 24
Chapter 3 Affine Yield Curve Models 25
3.1 US Yield Curve Dynamics 25
3.2 The Vasicek Model 30
3.3 The Cox-Ingersoll-Ross Model 32
Problems 34
PART 2 PORTFOLIO MANAGEMENT 35
Chapter 4 Portfolio Optimization 35
4.1 Two Risky Assets and a Riskfree Asset 35
4.2 Descriptive Statistics 38
4.3 Many Risky Assets and a Riskfree Asset 42
4.4 Any Number of Risky Assets 52
Problems 57
Chapter 5 Constrained Portfolio Optimization 58
5.1 No Short Sales, No Borrowing, and Other Constraints 58
5.2 Any Number of Risky Assets 68
Problems 77
Chapter 6 Portfolio Performance 78
6.1 Evaluation Measures 78
Problems 80
Chapter 7 Portfolio Diversification Lowers Risk 81
7.1 Basics 81
7.2 International 82
Problems 84
PART 3 SECURITY ANALYSIS 85
Chapter 8 Stock Valuation 85
8.1 Dividend Discount Model 85
Problems 86
Chapter 9 Du Pont System Of Ratio Analysis 87
9.1 Basics 87
Problems 88
PART 4 STOCKS 89
Chapter 10 Asset Pricing 89
10.1 Static CAPM Using Fama-MacBeth Method 89
10.2 APT or Intertemporal CAPM Using Fama-McBeth Method 93
Problems 98
Chapter 11 Market Microstructure 100
11.1 National Best Bid and Offer (NBBO) 100
11.2 Transaction Cost By Exchange Using TAQ Data 100
11.3 Limit Order Book Vs. Call Market 106
11.4 Transaction Cost Measures 108
11.5 Transaction Cost Components 110
11.6 Probability of Informed Trading (PIN) 111
Problems 113
Chapter 12 Life-Cycle Financial Planning 114
12.1 Taxable Vs. Traditional Vs. Roth Savings 114
12.2 Basic Life-Cycle Planning 115
12.3 Full-Scale Life-Cycle Planning 118
Problems 125
PART 5 INTERNATIONAL INVESTMENTS 126
Chapter 13 International Parity 126
13.1 System of Four Parity Conditions 126
13.2 Estimating Future Exchange Rates 128
Problems 129
Chapter 14 Swaps 130
14.1 Valuation of Interest Rate Swaps 130
14.2 Valuation of Currency Swaps 132
Problems 133
PART 6 OPTIONS, FUTURES, AND OTHER DERIVATIVES 135
Chapter 15 Option Payoffs and Profits 135
15.1 Basics 135
Problems 136
Chapter 16 Option Trading Strategies 137
16.1 Two Assets 137
16.2 Four Assets 140
Problems 143
Chapter 17 Put-Call Parity 146
17.1 Basics 146
17.2 Payoff Diagram 146
Problems 148
Chapter 18 Binomial Option Pricing 149
18.1 Estimating Volatility 149
18.2 Single Period 150
18.3 Multi-Period 153
18.4 Risk Neutral 157
18.5 Average of N and N-1 160
18.6 Convergence to Normal 162
18.7 American With Discrete Dividends 164
18.8 Full-Scale 168
Problems 173
Chapter 19 Black-Scholes Option Pricing 175
19.1 Basics 175
19.2 Continuous Dividend 176
19.3 Greeks 180
19.4 Daily Delta Hedging 184
19.5 Trading Strategies Over Any Horizon 187
19.6 Implied Volatility 192
19.7 Exotic Options 194
Problems 199
Chapter 20 Futures 201
20.1 Spot-Futures Parity (Cost of Carry) 201
20.2 Margin 203
Problems 204
Chapter 21 Pricing By Simulation 205
21.1 Path-Independent Derivatives 205
21.2 Path-Independent Derivatives With Jumps 206
21.3 Path-Independent Derivatives With Stratified Sampling 208
21.4 Path-Dependent Derivatives 209
21.5 Path-Dependent Derivatives With Jumps 210
Problems 211
Chapter 22 Corporate Bonds 213
22.1 Two Methods 213
22.2 Impact of Risk 215
Problems 216
PART 7 EXCEL SKILLS 217
Chapter 23 Useful Excel Tricks 217
23.1 Quickly Delete The Instruction Boxes and Arrows 217
23.2 Freeze Panes 217
23.3 Spin Buttons and the Developer Tab 218
23.4 Option Buttons and Group Boxes 219
23.5 Scroll Bar 221
23.6 Install Solver or the Analysis ToolPak 222
23.7 Format Painter 222
23.8 Conditional Formatting 223
23.9 Fill Handle 224
23.10 2-D Scatter Chart 224
23.11 3-D Surface Chart 226
DOWNLOADABLE CONTENTS
Excel Modeling in Investments Fifth Edition.pdf
Ready-To-Build spreadsheets available in both
XLSX and XLS file formats:
Ch 01 Bond Pricing - Ready-To-Build.xlsx
Ch 02 The Yield Curve - Ready-To-Build.xlsx
Ch 03 Affine Yield Curve Models - Ready-To-Build.xlsx
Ch 04-05 Portfolio Optimization - Ready-To-Build.xlsm
Ch 06 Portfolio Performance - Ready-To-Build.xlsx
Ch 07 Portfolio Diversification Lowers Risk - Ready-To-Build.xlsx
Ch 08 Stock Valuation - Ready-To-Build.xlsx
Ch 09 Du Pont System of Ratio Analysis - Ready-To-Build.xlsx
Ch 10 Asset Pricing - Ready-To-Build.xlsx
Ch 11 Market Microstructure - Ready-To-Build.xlsx
Ch 12 Life-Cycle Financial Planning - Ready-To-Build.xlsx
Ch 13 International Parity - Ready-To-Build.xlsx
Ch 14 Swaps - Ready-To-Build.xlsx
Ch 15 Option Payoffs and Profits - Ready-To-Build.xlsx
Ch 16 Option Trading Strategies - Ready-To-Build.xlsx
Ch 17 Put-Call Parity - Ready-To-Build.xlsx
Ch 18 Binomial Option Pricing - Ready-To-Build.xlsx
Ch 19 Black-Scholes Option Pricing - Ready-To-Build.xlsx
Ch 20 Futures - Ready-To-Build.xlsx
Ch 21 Pricing By Simulation - Ready-To-Build.xlsx
Ch 22 Corporate Bonds - Ready-To-Build.xlsx
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