Financial Modeling with Crystal Ball and Excel (eBook)

Dr. John Charnes, PhD, MBA, is Professor, Scupin Faculty Fellow, and former director of the finance, economics, and decision sciences area in the University of Kansas School of Business. His specialty is the application of computer simulation and statistical methods for identifying and solving business problems, and his most current research involves using simulation for option pricing and hedging with derivatives to comply with Financial Accounting Standard (FAS) 133. Charnes has also performed research, consulting, and executive education for more than fifty corporations and other organizations.

Preface.

Acknowledgments.

About the Author.

Chapter 1: Introduction.

Financial Modeling.

Risk Analysis.

Monte Carlo Simulation.

Risk Management.

Benefits and Limitations of Using Crystal Ball.

Chapter 2: Analyzing Crystal Ball Forecasts.

Simulating A 50-50 Portfolio.

Varying the Allocations.

Presenting the Results.

Chapter 3: Building a Crystal Ball Model.

Simulation Modeling Process.

Defining Crystal Ball Assumptions.

Running Crystal Ball.

Sources of Error.

Controlling Model Error.

Chapter 4: Selecting Crystal Ball Assumptions.

Crystal Ball's Basic Distributions.

Using Historical Data to Choose Distributions.

Specifying Correlations.

Chapter 5: Using Decision Variables.

Defining Decision Variables.

Decision Table with One Decision Variable.

Decision Table with Two Decision Variables.

Using OptQuest.

Chapter 6: Selecting Run Preferences.

Trials.

Sampling.

Speed.

Options.

Statistics.

Chapter 7: Net Present Value and Internal Rate of
Return.

Deterministic NPV and IRR.

Simulating NPV and IRR.

Capital Budgeting.

Customer Net Present Value.

Chapter 8: Modeling Financial Statements.

Deterministic Model.

Tornado Chart and Sensitivity Analysis.

Crystal Ball Sensitivity Chart.

Conclusion.

Chapter 9: Portfolio Models.

Single-Period Crystal Ball Model.

Single-Period Analytical Solution.

Multiperiod Crystal Ball Model.

Chapter 10: Value at Risk.

VaR.

Shortcomings of VaR.

CVaR.

Chapter 11: Simulating Financial Time Series.

White Noise.

Random Walk.

Autocorrelation.

Additive Random Walk with Drift.

Multiplicative Random Walk Model.

Geometric Brownian Motion Model.

Mean-Reverting Model.

Chapter 12: Financial Options.

Types of Options.

Risk-Neutral Pricing and the Black-Scholes Model.

Portfolio Insurance.

American Option Pricing.

Exotic Option Pricing.

Bull Spread.

Principal-Protected Instrument.

Chapter 13: Real Options.

Financial Options and Real Options.

Applications of ROA.

Black-Scholes Real Options Insights.

ROV Tool.

Summary.

Appendix A: Crystal Ball's Probability Distributions.

Appendix B: Generating Assumption Values.

Appendix C: Variance Reduction Techniques.

Appendix D: About the Download.

Glossary.

References.

Index.