Study-Unit Description

Study-Unit Description


CODE BKF4310

 
TITLE Financial Modelling

 
UM LEVEL 04 - Years 4, 5 in Modular UG or PG Cert Course

 
MQF LEVEL 6

 
ECTS CREDITS 4

 
DEPARTMENT Banking, Finance and Investments

 
DESCRIPTION Financial Modelling is intended to give students the opportunity to widen and deepen their knowledge of financial theory and practice by explaining how financial models and techniques may be implemented. Students are expected to use Excel to model a number of common applications including the construction of portfolios, tests of market efficiency, estimation of risk measures, performance measurement and the valuation of options. By the end of the unit students should have a much clearer understanding of finance concepts as well as an extended knowledge of the spread sheet package.

Study-unit Aims:

The aim of this study-unit is to equip students with the knowledge and tools to implement financial models using Excel. The study unit will cover a number of financial modelling methods, including present and future value, matrix calculations, optimisation, regression analysis, simulation, and the event study methodology.

Learning Outcomes:

1. Knowledge & Understanding:

By the end of the study-unit the student will be able to:
- Understand the objectives of financial modelling and the characteristics of financial data.
- Develop portfolio models i.e. efficient portfolios and the black-litterman approach.
- Develop a basic understanding of VBA.
- Understand the application of VaR through its 3 methods: Monte Carlo, Historical and Analytical.
- Develop, construct and run an event study analysis of the abnormal returns.
- Estimate betas and calculate a firm's cost of capital.
- Use and develop spreadsheet-based solutions to financial problems.

2. Skills:

By the end of the study-unit the student will be able to:
- Construct and examine the characteristics of distributions of returns.
- Download and use financial data from the internet for a range of securities, including stocks, bonds, derivatives and currencies.
- Undertake a range of financial and statistical calculations in Excel.
- Use Excel's regression analysis tool, linear estimation function and regression functions.
- Conduct an Event Study in Excel.
... including many others.

Main Text/s and any supplementary readings:

Lecturer’s Powerpoint Slides.
“Financial Modelling”, by Simon Benninga (2008), MIT press.
“Advanced Modelling in Finance using Excel and VBA”, by Mary Jackson and Mike Staunton (2001), Wiley.
“An Elementary Introduction to Mathematical Finance”, by Sheldon Ross (2011), Cambridge University Press.
“An Undergraduate Introduction to Financial Mathematics”, by J. Robert Buchanan (2006), World Scientific Publishing.
... amongst any other materials introduced during the unit.

 
STUDY-UNIT TYPE Lecture and Tutorial

 
METHOD OF ASSESSMENT
Assessment Component/s Sept. Asst Session Weighting
Assignment Yes 20%
Examination (2 Hours) Yes 80%

 
LECTURER/S Jean Paul Gauci

 

 
The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints.
Units not attracting a sufficient number of registrations may be withdrawn without notice.
It should be noted that all the information in the description above applies to study-units available during the academic year 2023/4. It may be subject to change in subsequent years.

https://www.um.edu.mt/course/studyunit