1. Introduction to Financial Modelling

What is Financial Modelling?

OBJECTIVES

  • Provide a general introduction an overview of the subject of financial modelling.
  • Demonstrate the range of skills and and knowledge necessary to be a well-rounded professional financial modeller.
  • Give context to the structure and context of the CertFM Program.

DESCRIPTION

  • Overview. This consists of free reading materials. It covers the meaning of financial modelling, its purpose, use and benefits, as well as the skill requirements to be a well-rounded modeller and analyst. The materials therefore give important context as to the structure and content of the overall program of The Certificate in Financial Modelling and Data Analysis, and its levels. (Unlike the courses within the program, these reading materials do not contain quizzes or exercises; they are for background information only),
  • Further informationThe discussion places modelling within the context of decision support. It describes some of the challenges in making good decisions, and some approaches to overcome these.  It discusses the process to plan effective models, the links between traditional modelling and data analysis, and an introduction to modelling principles, including sensitivity analysis. It provides examples of simple models, including those which evaluate common financial decision criteria.

KEY TOPICS

  • Definition of modelling · Purpose, uses, application areas · Influence diagrams · Simple examples.
  • Principles to design and build useful models that support decisions.
  • Decision criteria in business and finance · Introduction to breakeven and pay-back periods · net present value (NPV) , internal rate of return (IRR).
  • Introduction to sensitivity analysis and some of its variations.
  • Links between modelling and data analysis · Generic model types.
  • The skill-sets required to be a well-rounded financial modeller and analyst