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This edition first published 2018
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ISBN 978-1-118-90401-5 (hardback) ISBN 978-1-118-90400-8 (ePub)
ISBN 978-1-118-90394-0 (ePDF)
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“To my mother, father and the Godsall and Rees families”
This text aims to address key topics in the design and building of financial models, so that such models are appropriate to decision support, are transparent and flexible. It aims to address the issues that are generally applicable in many applications, highlighting several core themes:
The work is structured into six Parts:
Note that Part V and Part VI are relevant on a stand-alone basis and could be read before the other Parts. This allows the earlier Parts of the text to focus on the general issues relating to model design, build and use, even as, on occasion, they refer to the later Parts.
This text builds on some key principles that were also a core aspect of the author's earlier work Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level (John Wiley & Sons, 2008), especially that of using sensitivity thought processes as a model design tool. However, the discussion here is more extensive and detailed, reflecting the author's enhanced view of these topics that has been gained through the decade since the publication of the earlier work. Indeed, this text is approximately three times the length of that of the corresponding elements of the earlier work (i.e. of Chapters 1, 2 and 6 in that work). Note that, unlike the earlier work, this text does not aim to treat specific applications in depth (such as financial statements, valuation, options and real options). Further, the topic of risk, uncertainty and simulation modelling is covered only briefly, since the author's Business Risk Modelling in Practice: Using Excel, VBA and @RISK (John Wiley & Sons, 2015) provides a detailed treatment of this topic.
The website associated with this text contains approximately 235 Excel files (screen-clips of most of which are shown in the text). These are an integral part of this work, and it will generally be necessary to refer to these files in order to gain the maximum benefit from reading this text.
Michael Rees has a Doctorate in Mathematical Modelling and Numerical Algorithms and a B.A. with First Class Honours in Mathematics, both from Oxford University. He has an MBA with Distinction from INSEAD in France. In addition, he studied for the Wilmott Certificate of Quantitative Finance, where he graduated in first place for coursework and received the Wilmott Award for the highest final exam mark.
Since 2002, he has worked as an independent expert in quantitative decision support, financial modelling, economic, risk and valuation modelling, providing training, model-building and advisory services to a wide range of corporations, consulting firms, private equity businesses and training companies.
Prior to becoming independent, Michael was employed at J.P. Morgan, where he conducted valuation and research work, and prior to that he was a Partner with strategy consultants Mercer Management Consulting, both in the U.K. and in Germany. His earlier career was spent at Braxton Associates (a boutique strategy consulting firm that became part of Deloitte and Touche), where he worked both in the UK and as a founding member of the start-up team in Germany.
Michael is a dual UK/Canadian citizen. He is fluent in French and German, and has wide experience of working internationally and with clients from diverse cultural backgrounds. In additional to this text, he is the author of Financial Modelling in Practice: A Concise Guide to Intermediate and Advanced Level (John Wiley & Sons, 2008), Business Risk and Simulation Modelling in Practice (John Wiley & Sons, 2015), a contributing author to The Strategic CFO: Creating Value in a Dynamic Market Environment (Springer, 2012) and has also contributed articles to the Wilmott Magazine.
This book is accompanied by a companion website which can be accessed at www.principlesoffinancialmodelling.com (Password hint: The last word in Chapter 5).
The website includes:
These facilitate learning and have a strong emphasis on practical solutions and direct real-world application.