Introduction to Financial Modelling
Principles of Excel as a Modelling Tool
Common Modeling Structures (I)
Further Operations and Shortcuts
Excel Functions (I): Information and Numerical Aggregation
Excel Functions (II): Conditionality, Aggregations and Arrays
Common Modelling Structures (II)
Excel Functions (II): Lookups and Referencing
Model Planning and Best Practices
CUTZ or ... intrducton to rest of program....and clisoing remarks
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1.5 Using Excel as a Modelling Platform

Excel is the most widespread tool used to build financial models. The following provides a brief overview of its key benefits and limitations.

Key Benefits

Excel has a wide set of functionality and functions that are constantly being improved and added to.

It can provide a transparent and highly flexible working environment (providing it is used well and in accordance with good practice). Its functionality allows for many operations to be performed easily and quickly, and its in-built functions allow for complex calculations to be conducted.

In addition to the “raw” Excel worksheet functionality, it also contains the possibility to use VBA (Visual Basic for Applications). This provides the ability to automate operations that are within raw Excel, as well as to write “pure” code in a way analogous to when using other computer languages (e.g. Python, C++ etc.). VBA is an inherent and integrated part of Excel, so that the combination is potential very powerful.

The functionality of Excel is in constant development. There has been especially strong development in recent years on Excel’s capabilities in data analysis and manipulation. Further, Excel also contains (free) add-ins that are available to be loaded (such as PowerQuery and PowerPivot), and such add-ins can therefore be considered as part of Excel.

In summary, Excel is suitable in a large number of situations, is relatively easy to learn, and can provide a flexible and transparent platform, especially if used in accordance with the principles of good practice.

Some Limitations

Excel may not be a suitable environment for the final implementation of applications which are extremely computationally intensive or based on very large data sets and which require a very rapid computational and response time. However, it can almost always be used as a convenient platform to create prototypes for many such situations in any case.

In the CERTFM Program, we aim to ensure an appropriate balance between concepts and implementation. The Program uses Excel, VBA and some shipped add-ins, as well as covering (in detail) the underlying concepts in finance, economics, data analytics, and statistics (amongst others). These concepts can be demonstrated quite clearly by using Excel, but of course the need to understand them would still exist even if Excel did not exist or if another implementation platform were used.

Excel in the CertFM Program

The CertFM Program covers the concepts involved in financial, economic and data analysis in great detail. In this sense, it is a “platform-free” program. indeed, the need to understand the concepts would exist even if a non-Excel platform (or programming language) were used to implement the models and analysis.

On the other hand, not only does Excel (in combination with VBA, PowerQuery and PowerPivot) provide a useful way to demonstrate the concepts, it also provides a powerful platform for general modelling. It is therefore the basis for the “practical” side of the CertFM Program.

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