Too often, finance courses stop short of making a connection between textbook finance and the problems of real-world business. Financial Modeling bridges this gap between theory and practice by providing a nuts-and-bolts guide to solving common financial models with spreadsheets. Simon Benninga takes the reader step by step through each model, showing how it can be solved using Microsoft Excel.

 The long-awaited third edition of this standard text maintains the "cookbook" features and Excel dependence that have made the first and second editions so popular. It also offers significant new material, with new chapters covering such topics as bank valuation, the Black-Litterman approach to portfolio optimization, Monte Carlo methods and their applications to option pricing, and using array functions and formulas. Other chapters, including those on basic financial calculations, portfolio models, calculating the variance-covariance matrix, and generating random numbers, have been revised, with many offering substantially new and improved material. Other areas covered include financial statement modeling, leasing, standard portfolio problems, value at risk (VaR), real options, duration and immunization, and term structure modeling. Technical chapters treat such topics as data tables, matrices, the Gauss-Seidel method, and tips for using Excel. The last section of the text covers the Visual Basic for Applications (VBA) techniques needed for the book. The accompanying CD contains Excel worksheets and solutions to end-of-chapter exercises.

Corporate Finance Models p. 1
Basic Financial Calculations p. 3
Calculating the Cost of Capital p. 39
Financial Statement Modeling p. 103
Building a Financial Model: The Case of PPG Corporation p. 135
Bank Valuation p. 177
The Financial Analysis of Leasing p. 203
The Financial Analysis of Leveraged Leases p. 219
Portfolio Models p. 237
Portfolio Models - Introduction p. 239
Calculating Efficient Portfolios When There Are No Short-Sale Restrictions p. 261
Calculating the Variance-Covariance Matrix p. 291
Estimating Betas and the Security Market Line p. 317
Efficient Portfolios without Short Sales p. 335
The Black-Litterman Approach to Portfolio Optimization p. 349
Event Studies p. 371
Value at Risk p. 397
Option-Pricing Models p. 419
An Introduction to Options p. 421
The Binomial Option-Pricing Model p. 443
The Lognormal Distribution p. 483
The Black-Scholes Model p. 509
Option Greeks p. 549
Portfolio Insurance p. 577
An Introduction of Monte Carlo Methods p. 597
Using Monte Carlo Methods for Option Pricing p. 613
Real Options p. 649
Bonds p. 669
Duration p. 671
Immunization Strategies p. 693
Modeling the Term Structure p. 705
Calculating Default-Adjusted Expected Bond Returns p. 719
Technical Considerations p. 743
Generating Random Numbers p. 745
Data Tables p. 765
Matrices p. 775
The Gauss-Seidel Method p. 785
Excel Functions p. 789
Using Array Functions and Formulas p. 825
Some Excel Hints p. 841
Introduction to Visual Basic for Applications p. 865
User-Defined Functions with VBA p. 867
Types and Loops p. 895
Macros and User Interaction p. 919
Arrays p. 941
Objects and Add-Ins p. 975
Information from the Web p. 1029
References p. 1095
Index p. 1107