Mastering Financial Mathematics in Microsoft Excel : A Practical Guide for Business Calculations

by Day, Alastair

• ISBN13: 9780273688662
• ISBN10: 0273688669
• Edition: CD
• Format: Paperback w/CD
• Copyright: 2005-01-01
• Publisher: FT Press

Summary

Provides financial managers, finance professionals and finance students with a quick, easy and practical guide to using Excel for financial mathematics. Financial mathematics can be applied more quickly and easily in Excel than any other package, there is therefore demand for a book in this field. Will improve financial managers' abilities with Excel and provide them with solutions to their financial problems. Highly practical : includes a library of templates, exercises and solutions as an illustration of the methods. Part of the highly respected and recognisedMasteringseries. Positioning: Will use simpler models to illustrate the formulas and methodology thanMastering Financial ModellingandMastering Risk Modelling. Benchmark: 1. Mastering Financial Calculations (Steiner). Similar book, but for professionals in financial markets, and with less emphasis on Excel. Benchmark 2. Paul Wilmott'sQuantitative Finances(Wiley) is in this space but is a high-level academic text and is less practical and easy to absorb. The exercises and solutions in ours will significantly cut down learning time. Ours also focuses wholly on Excel, which is a standard for all financial managers and students, this is what they want and need to know.

Table of Contents

Acknowledgements	p. x
About the author	p. xi
Conventions	p. xii
Overview	p. xiii
Warranty and disclaimer	p. xv
Introduction	p. 1
Overview	p. 3
Common Excel errors	p. 4
Systematic design method	p. 6
Auditing	p. 10
Summary	p. 12
Basic financial arithmetic	p. 13
Simple interest	p. 15
Compound interest	p. 19
Nominal and effective rates	p. 25
Continuous discounting	p. 27
Conversions and comparisons	p. 27
Exercise	p. 28
Summary	p. 28
Cash flows	p. 29
Net present value	p. 31
Internal rate of return	p. 33
XNPV and XIRR	p. 37
XNPV periodic example	p. 38
Modified internal rate of return	p. 39
Exercise	p. 41
Summary	p. 41
Bonds calculations	p. 43
Description	p. 45
Cash flows	p. 48
Zero coupons	p. 50
Yield	p. 51
Yield to call	p. 51
Price and yield relationship	p. 53
Yield curve pricing	p. 54
Other yield measures	p. 55
Yield measures	p. 57
Exercise	p. 59
Summary	p. 60
Bonds risks	p. 61
Risks	p. 63
Duration	p. 66
Convexity	p. 70
Comparison	p. 75
Exercise	p. 76
Summary	p. 77
Floating rate securities	p. 79
Floating rates	p. 81
Characteristics of interest rate securities	p. 82
Yield evaluation	p. 84
Coupon stripping	p. 88
Exercise	p. 89
Summary	p. 91
Amortization and depreciation	p. 93
Amortization	p. 95
Full amortization	p. 97
Delayed payments	p. 97
Sum of digits	p. 100
Straight line and declining balance depreciation	p. 102
UK declining balance method	p. 103
Double declining balance depreciation	p. 104
French depreciation	p. 104
Exercise	p. 107
Summary	p. 108
Swaps	p. 109
Definitions	p. 111
How swaps save money	p. 114
Advantages of swaps	p. 115
Terminating interest rate swaps	p. 116
Implicit credit risk	p. 117
Worked single currency swap	p. 117
Valuation	p. 120
Cross currency swap	p. 120
Worked example	p. 121
Swaptions	p. 123
Exercise	p. 124
Summary	p. 125
Forward interest rates	p. 127
Definitions	p. 129
Example forward rates	p. 129
Hedging principles	p. 132
Forward rate agreement	p. 133
Yield curves	p. 136
Exercise	p. 140
Summary	p. 141
Futures	p. 143
Futures market	p. 145
Terminology	p. 146
Benefits	p. 147
Clearinghouse operation	p. 148
Bond futures	p. 149
Hedging mechanisms	p. 149
Hedging example one	p. 151
Hedging example two	p. 153
Exercise	p. 156
Summary	p. 156
Foreign exchange	p. 157
Risk	p. 159
Spot rates	p. 161
Longer dates	p. 165
Equivalence	p. 166
Comparisons and arbitrage	p. 168
Exercise	p. 168
Summary	p. 169
Options	p. 171
Description	p. 173
Terminology	p. 173
Underlying asset	p. 175
Call options	p. 176
Put options	p. 180
Example	p. 183
Covered call	p. 184
Insurance using a stock and a long put	p. 186
Pricing models	p. 186
Black Scholes model	p. 188
Call put parity	p. 190
Greeks	p. 191
Binomial models	p. 194
Comparison to Black Scholes	p. 198
Exercise	p. 202
Summary	p. 202
Real options	p. 203
Real options	p. 205
Black Scholes model	p. 206
Binomial model	p. 207
Exercise	p. 209
Summary	p. 209
Valuation	p. 211
Valuation methods	p. 213
Assets	p. 214
Market methods	p. 215
Multi-period dividend discount models	p. 217
Free cash flow valuation	p. 219
Adjusted present value	p. 228
Economic profit	p. 231
Exercise	p. 233
Summary	p. 234
Leasing	p. 235
Economics of leasing	p. 237
Interest rates	p. 238
Classification	p. 240
Amortization	p. 244
Accounting	p. 245
Settlements	p. 247
Lessor evaluation	p. 250
Lessee evaluation	p. 254
Exercise	p. 256
Summary	p. 257
Basic statistics	p. 259
Methods	p. 261
Descriptive statistics	p. 261
Probability distributions	p. 273
Sampling/Central Limit Theorem	p. 281
Hypothesis testing	p. 286
Correlation and regression	p. 297
LINEST function	p. 305
Exercise	p. 307
Summary	p. 308
Appendix	p. 309
Index	p. 345
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