Extra materials
For Financial Modeling (3rd edition)
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This webpage is a guide to some additional materials to Financial Modeling, 3rd 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 2010ís 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 arenít that many, but here are few Iíve noticed.Let me know if youíve got more.

         Basic document (updated 30 December 2010)

         Spreadsheet

Multi-variate Monte Carlo: Chapters 22 and 22 of Financial Modeling treat one-parameter Monte Carlo methods.These work well for certain kinds of option problems, but what if there are several correlated variables?

         Basic document:Multi-variate Monte Carlo

         Spreadsheet

Luciano Machain has a free Excel Add-In 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

         Spreadsheet

Better way to compute the global minimum variance portfolio

         Basic document

         Spreadsheet

Running Data Table on a blank cell:Very useful for doing random simulations

         Basic document

         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.

         Basic document

         Spreadsheet

Valuing employee stock options (ESO):Chapter 17 of FM3 implements the Hull-White (2004) ESO valuation model, in which employees are assumed to early-exercise 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 optionís intrinsic value is greater than a percentage of the Black-Scholes value. The economic foundations of this model may be more appealing than those of Hull-White.I explore an Excel implementation of Helmantelís idea.(update 30aug08)

         Basic document

         Spreadsheet

Closed-Form 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.

         Powerpoint

         Spreadsheet

 

 

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