FIN205
DATA TECHNOLOGIES
FOR FINANCIAL
MODELLING
STUDY GUIDE (5CU)
Course Development Team
Head of Programme : Dr Tan Chong Hui
Course Developer(s)
... [Show More] : Dr Lo Swee Won
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University of Social Sciences.
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Release V1.0
Table of Contents
i
Table of Contents
Course Guide ..........................................................................................................................1
1. Welcome ...........................................................................................................................2
2. Course Description and Aims .......................................................................................3
3. Learning Outcomes.........................................................................................................5
4. Learning Materials..........................................................................................................6
5. Assessment Overview....................................................................................................7
6. Course Schedule............................................................................................................10
7. Learning Mode ..............................................................................................................11
Study Unit 1 Introduction to Financial Modelling .................................................1-1
Learning Outcomes..........................................................................................................1-2
Overview...........................................................................................................................1-3
Chapter 1 Financial modelling.......................................................................................1-4
1.1 What is financial modelling?................................................................................1-4
1.2 Why is financial modelling important? ..............................................................1-4
1.3 Who would build financial models? ...................................................................1-5
Chapter 2 Finance fundamentals...................................................................................1-8
2.1 Finance.....................................................................................................................1-8
2.2 Financial market.....................................................................................................1-9
2.3 Financial institutions ...........................................................................................1-11
Chapter 3 Financial modelling covered in this course .............................................1-16
3.1 Time value of money...........................................................................................1-16
3.2 Financial analysis .................................................................................................1-19
3.3 Financial investment and asset valuation ........................................................1-23
3.4 Financial planning and portfolio management...............................................1-29
3.5 Advanced topics...................................................................................................1-33
3.6 Basics of data technologies .................................................................................1-38
References .......................................................................................................................1-40
Study Unit 2 Financial Statement Analysis..............................................................2-1
Learning Outcomes..........................................................................................................2-2
Overview...........................................................................................................................2-3
Chapter 1 Financial statement........................................................................................2-4
1.1 Basics........................................................................................................................2-4
1.2 Income statement...................................................................................................2-8
1.3 Balance sheet.........................................................................................................2-10
1.4 Cash flow statement ............................................................................................2-15
Chapter 2 Financial statement analysis ......................................................................2-18
2.1 Horizontal and vertical analysis ........................................................................2-18
2.2 Ratio analysis........................................................................................................2-19
Table of Contents
ii
Chapter 3 Using Excel to do financial statement analysis .......................................2-26
References .......................................................................................................................2-27
Study Unit 3 Time Value of Money...........................................................................3-1
Learning Outcomes..........................................................................................................3-2
Overview...........................................................................................................................3-3
Chapter 1 Basics of the time value of money...............................................................3-4
1.1 Simple interest and compound interest..............................................................3-4
1.2 Present value and future value ............................................................................3-5
1.3 Timeline...................................................................................................................3-7
1.4 Interest rate .............................................................................................................3-8
1.5 Nominal and real rate .........................................................................................3-10
1.6 Risk.........................................................................................................................3-10
Chapter 2 Investment and project valuation .............................................................3-12
2.1 Valuation...............................................................................................................3-12
2.2 Decision rules .......................................................................................................3-15
References .......................................................................................................................3-19
Study Unit 4 Financial Investment and Asset Valuation ......................................4-1
Learning Outcomes..........................................................................................................4-2
Overview...........................................................................................................................4-3
Chapter 1 Basics of financial investments ....................................................................4-4
1.1 Assets and markets ................................................................................................4-4
1.2 Asset types ..............................................................................................................4-5
1.3 Long and short position........................................................................................4-6
Chapter 2 Investment classes .........................................................................................4-7
2.1 Equity.......................................................................................................................4-7
2.2 Fixed-income securities.......................................................................................4-14
2.3 Derivatives ............................................................................................................4-22
References .......................................................................................................................4-29
Study Unit 5 Financial planning and portfolio management...............................5-1
Learning Outcomes..........................................................................................................5-2
Overview...........................................................................................................................5-3
Chapter 1 Financial planning .........................................................................................5-4
1.1 Financial planning for individuals ......................................................................5-4
1.2 Financial planning for businesses .......................................................................5-9
2.1 Basics......................................................................................................................5-13
2.2 Performance evaluation ......................................................................................5-16
References .......................................................................................................................5-20
Study Unit 6 Advanced topics.....................................................................................6-1
Table of Contents
iii
Learning Outcomes..........................................................................................................6-2
Overview...........................................................................................................................6-3
Chapter 1 Supplementary fundamental models in finance.......................................6-4
1.1 Weighted average cost of capital.........................................................................6-4
1.2 Minimum-variance and efficient frontier...........................................................6-5
1.3 Capital allocation line and capital market line ..................................................6-5
1.4 Return generating model......................................................................................6-6
2.1 Mean, median and mode ....................................................................................6-10
2.2 Frequency distribution........................................................................................6-11
2.3 Probability distribution and function ...............................................................6-11
2.4 Data type ...............................................................................................................6-13
References .......................................................................................................................6-15
Course Guide
Course Guide
2
1. Welcome
Welcome to the course FIN205 Data Technologies for Financial Modelling, a 5 credit unit (CU)
course.
This Study Guide will be your personal learning resource to take you through the course
learning journey. The guide is divided into two main sections – the Course Guide and
Study Units. [Show Less]