Modelling the Financial Markets

Essential modelling techniques for treasury applications

What is it about?

This is a practical hands-on course which focuses on some key calculations made every day in a treasury. Financial modelling is the result of combining a rigorous application of modelling best practice with an understanding of the relationships being modelled. This course presents, in a straight forward manner, some of the more complex aspects of modelling.

Programme

Guidelines for building best practice models

• Structure for building in both rigour and flexibility

Traps in Excel functions

• Pitfalls for the unwary; Excel doesn’t always perform the calculation you expect

Sensitivity analysis

• Using data tables to communicate the range of outcomes – including the breaking point at which the decision would change – rather than a single point solution
• Calculating and illustrating market value sensitivity as assumptions are changed

Yield curves

• Understanding the relevant cash flows
• Converting between yield curves
• Quoting conventions and compounding periods

Bond valuations

• Constructing the model<.li>

• Understanding value sensitivity
• Understanding the key relationships between value, rates and maturity

Swap valuations

• Interest rate swap and cross currency swap valuation
• Sensitivity of values as key market drivers vary

Option valuations – Binomial model

• Constructing the model
• Demonstrating value sensitivity vs underlying, time, volatility
• Interpreting the results

Option valuations – Black Scholes model

• Constructing the model
• Demonstrating value sensitivity vs underlying, time, volatility
• Interpreting the results

Value at Risk analysis, diversification and analysis, diversification and
correlation

• What diversification can achieve (and what it can’t)
• Pension fund analysis, interaction and mitigation of asset and liability risks
• Correlation, volatility and market shocks

How do you benefit?

Participants will gain a detailed understanding of how to structure models, the demands placed on them and how they can be used as a basis for explaining findings to others. This will increase participants’ confidence in building and using models, leading to increased productivity and reduced error rates.

Who is it for?

• All those who use spreadsheets for treasury analysis, planning and risk management
• Professionals who want to increase the power, flexibility and transparency of their financial models
• Treasurers who need to deepen and broaden their understanding of financial relationships, drivers and sensitivities

Trainer

• Doug Williamson FCT. Ian Jakeways FCT.