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Mastering Financial Mathematics in Excel: A Practical Guide for Business Calculations
Tools enabling managers to carry out financial calculations have evolved in the last 20 years from tables through calculators to programs on PCs and personal organisers. Today, the majority of those in finance have Excel on their desks and increasingly on their laptops or pocket computers.
Mastering Financial Mathematics in Microsoft Excel
provides a comprehensive set of tools and methods to apply Excel to solving mathematical problems. Alastair Day clearly explains the basic calculations for mathematical finance backed up with simple templates for further use and development, together with numerous examples and exercises.
Providing an explanation of key financial formulas and subject areas, the book includes a CD which:
· allows you to work step-by-step through each of the chapters and examples
· shows the use of formulas using straight-forward Excel templates
· introduces examples and exercises for extension work
· provides a menu of basic templates for further development
· enables you to practise, develop and improve your efficiency and competence with Excel
Mastering Financial Mathematics in Microsoft Excel will be invaluable in helping improve your Excel skills and understand the underlying financial concepts.
CONTENTS:
Acknowledgements
About the Author
Conventions
Overview
Warranty and disclaimer
1 Introduction
Overview
Common Excel errors
Systematic design method
Auditing
Summary
2 Basic financial arithmetic
Simple interest
Compound interest
Nominal and effective rates
Continuous discounting
Conversions and comparisons
Exercise
Summary
3 Cash flows
Net present value
Internal rate of return
XNPV and XIRR
XNPV periodic example
Modified internal rate of return
Exercise
Summary
4 Bonds calculations
Description
Cash flows
Zero coupons
Yield
Yield to call
Price and yield relationship
Yield curve pricing
Other yield measures
Yield measures
Exercise
Summary
5 Bonds risks
Risks
Duration
Convexity
Comparison
Exercise
Summary
6 Floating rate securities
Floating rates
Characteristics of interest rate securities
Yield evaluation
Coupon stripping
Exercise
Summary
7 Amortization and depreciation
Amortization
Full amortization
Delayed payments
Sum of digits
Straight line and declining balance depreciation
UK declining balance method
Double declining balance depreciation
French depreciation
Exercise
Summary
8 Swaps
Definitions
How swaps save money
Advantages of swaps
Terminating interest rate swaps
Implicit credit risk
Worked single currency swap
Valuation
Cross currency swap
Worked example
Swaptions
Exercise
Summary
9 Forward interest rates
Definitions
Example forward rates
Hedging principles
Forward rate agreement
Yield curves
Exercise
Summary
10 Futures
Futures market
Terminology
Benefits
Clearinghouse operation
Bond futures
Hedging mechanisms
Hedging example one
Hedging example two
Exercise
Summary
11 Foreign exchange
Risk
Spot rates
Longer dates
Equivalence
Comparisons and arbitrage
Exercise
Summary
12 Options
Description
Terminology
Underlying asset
Call options
Put options
Example
Covered call
Insurance using a stock and a long put
Pricing models
Black Scholes model
Call put parity
Greeks
Binomial models
Comparison to Black Scholes
Exercise
Summary
13 Real options
Real options
Black Scholes model
Binomial model
Exercise
Summary
14 Valuation
Valuation methods
Assets
Market methods
Multi-period dividend discount models
Free cash flow valuation
Adjusted present value
Economic profit
Exercise
Summary
15 Leasing
Economics of leasing
Interest rates
Classification
Amortization
Accounting
Settlements
Lessor evaluation
Lessee evaluation
Exercise
Summary
16 Basic statistics
Methods
Descriptive statistics
Probability distributions
Sampling/Central Limit Theorem
Hypothesis testing
Correlation and regression
LINEST function
Exercise
Summary
Appendix
Index
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