Extra
materials
For Financial Modeling (3^{rd} edition)
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This webpage is a guide to some additional materials to Financial
Modeling, 3^{rd} edition (FM3). Some of what is listed here
will ultimately find its way into the next edition of FM. All the materials are preliminary and
mistakes are inevitable.
The materials are
password protected.
Please write me for a password.

Adding a Personal.xlsb notebook: I wrote this to illustrate how I automate
Excel 2010’s Copy as Picture feature. Very useful for copying in Excel
and pasting as a picture (no link) in Word;
·
Click
here to download
Bugs
in Excel: There aren’t that many, but here are few I’ve noticed. Let me know if you’ve got more.
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Basic document
(updated 30 December 2010)
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Spreadsheet
Multivariate Monte Carlo: Chapters 22 and 22 of Financial
Modeling treat oneparameter Monte Carlo methods. These work well for certain kinds of option
problems, but what if there are several correlated variables?
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Basic document: Multivariate Monte Carlo
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Spreadsheet
Luciano Machain has a free Excel AddIn for Monte Carlo
simulations. [Not needed for the
Financial Modeling materials, but looks very nice.]
Computing the correlation matrix: An efficient way to compute the correlation
matrix.
·
Basic
document
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Spreadsheet
Better
way to compute the global minimum variance portfolio
·
Basic document
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Spreadsheet
Running
Data Table on a blank cell: Very
useful for doing random simulations
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Basic
document
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Spreadsheet
Skewness
and kurtosis: An important topic
not discussed in FM3. Ultimately I hope
to integrate this into a discussion of option pricing. In the meantime, this is a little technical
note.
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Basic
document
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Spreadsheet
Valuing employee stock options (ESO): Chapter 17 of FM3 implements the HullWhite
(2004) ESO valuation model, in which employees are assumed to earlyexercise
their options if stock price is greater than a multiple of the option exercise
price. Mark Helmantel
has suggested an alternative model: Employees exercise their ESOs if the
option’s intrinsic value is greater than a percentage of the BlackScholes
value. The economic foundations of this model may be more appealing than those
of HullWhite. I explore an Excel
implementation of Helmantel’s idea. (update 30aug08)
·
Basic document
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Spreadsheet
ClosedForm
Approximations for Spread Option Prices and Greeks: This outstanding student project done in the
framework of my Tel Aviv University Financial Engineering course implements a
paper by Li,
Deng, Zhou . The project authors are Arik Leonidov and Netanel Elkayam.
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Powerpoint
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Spreadsheet