COURSE SYLLABUS

FINANCIAL MODELING (TCH443E)

Course name: Financial Modeling

Course Code: TCH443E
Faculty/School: Banking and Finance
Department: Corporate Finance
Credit hours: 3
Prerequisite(s): Corporate finance (TCH321E)

1. INSTRUCTOR(s) INFORMATION
No. Instructors’ name Email Cellphone Office
Assoc. Prof. Dr. Nguyen Viet vd.nguyen@ftu.edu.vn 0913078910 B212
1.
Dung
2. Dr. Duong Thi Hong Van van.duong@ftu.edu.vn 0913362995 B211
3. Dr. Nguyen Do Quyen quyendt@ftu.edu.vn 0982996288 B211
4. MSc. Nguyen Thi Thu Huyen huyenntt@ftu.edu.vn 0902116355 B211
2. COURSE DESCRIPTION
This course introduces basic concepts with respect to financial modeling. It focuses on calculus
tools that are widely used to solve financial problems. Upon completing this course, students
will be able to build business valuation models, asset pricing models and risk management
models using tools available on personal computer.
3. COURSE LEARNING OBJECTIVES
On completion of this course, the students should be able to:
Knowledge
CLO1. Understand the basis financial calculations
CLO2. Understand corporate valuation
CLO3. Understand efficient portfolio and security market line
CLO4. Understand binomial option pricing model
Skills
CLO5. Define a Black-Scholes pricing function
CLO6. Construct a Monte Carlo simulation
CLO7. Construct a log-normal price paths simulation
Capacity of Autonomy and Responsibility
CLO8 Personal morality (ready to cope with difficulties and to accept risks, persistence,
flexibility, confidence, hard work, enthusiasm, passion, self-control, integrity, criticism,
creativity...);
CLO9. Professional ethics (professional behavior, independence, initiative, ...);
4. COURSE CONTENT AND SCHEDULE
4.1. Course content
Time Allocation
Hour(s) on the class Self-study
No. Content Essays, exercise, with
Practice,
Lecture Assignments... teacher’s
Seminar
tutorials
Chapter 1: Basic Financial 2 1 1 5
1.
Calculations
Chapter 1: Basic Financial 2 1 1 5
2.
Calculations (cont.)

1
 Chapter 2: Corporate Valuation 2 1 2 5
3.
Overview
Chapter 2: Corporate Valuation 2 1 1.5 4
4.
Overview (cont.)
Chapter 3: Calculating the Weighted 2 2 1.5 4
5.
Average Cost of Capital (WACC)
Chapter 3: Weighted Average Cost 2 1 1 5
6.
of Capital (WACC) (cont.)
Chapter 3: Weighted Average Cost 2 1 2 6
7.
of Capital (WACC) (cont.)
Chapter 4: Calculating Efficient 2 1 1.5 4
8.
Portfolios
Chapter 5: Estimating Betas and the 2 1 1.5 4
9.
Security Market Line
Chapter 6: Efficient Portfolios 2 1 1.5 4
10.
without Short sales
Chapter 7: The Binomial Option 2 1 1.5 4
11.
Pricing Model
Chapter 8: The Black-Scholes 2 1 2 6
12.
Model
Chapter 9: An Introduction to 2 1 1.5 4
13.
Monte Carlo Methods
14. Chapter 10: Simulating stock prices 2 1 1.5 4
Chapter 11: Monte Carlo simulation 2 1 1.5 3.5
15.
for Investments
Total 30 15 22.5 67.5
4.2. Schedule of Lectures
Provides timeline of course progress in terms of content, instruction, and assessment
Lecture Title (Students’ Assessment
preparation)
Required Pre-
reading materials
Chapter 1. Basic Financial Calculations [1] Chapter 1,
1.1. Present value and Net present value pp.13-29
1 1.2. The Internal Rate of Return and Loan
tables
1.3. Multiple Internal Rates of Return
Chapter 1. Basic Financial Calculations [1]
(cont.) Chapter 1, pp. 30-
1.4.Future Values Schedules
2 45
1.5.A Pension problem – Complicating the
Future Value Problem
1.6.Discounting Using dated cash flows
Chapter 2. Corporate Valuation [1]
Overview Chapter 2, pp.53-
1.1.For methods to compute Enterprise 59
3
Value (EV)
1.2.Using Accounting Book values to value
a company

2
 1.3.The Efficient markets approach to
corporate valuation
Chapter 2. Corporate Valuation Overview [1]
(cont.) Chapter 2, pp.58-
1.4.Enterprise Value (EV) as the present 70
value of the free cash flows: DCF “top
down”
4
2.5. Free cash flows based on consolidated
statement of cash flows (CSCF)
2.6 Free cash flows based on Pro forma
financial statements

Chapter 3. Calculating the Weighted [1]

Average Cost of Capital (WACC) Chapter 3, pp.71-
3.1.Computing the Value of the Firm’s 89
Equity
5
3.2.Computing the Value of the Firm’s Debt
3.3.Computing the Firm’s Cost of Debt
3.4.Two approaches to Computing the
Firm’s Cost of Equity
Chapter 3. Calculating the Weighted [1]
Average Cost of Capital (WACC) (cont.) Chapter 3, pp.89-
6 3.5.Implementing the Gordon Model for the 95
Firm’s cost of equity
3.6.The CAPM: Computing the Beta
Chapter 3. Calculating the Weighted [1]
Average Cost of Capital (WACC) (cont.) Chapter 3, pp.95-
7
3.7.Three approaches to computing the 117
Expected return on the market
Chapter 4. Calculating Efficient Portfolios [1]
4.1. Five propositions on efficient portfolios Chapter 9, pp.221-
and the CAPM 248
8
4.2. Calculation the Efficient frontier
4.3. Finding the market portfolio: The
capital market line (CML)
Chapter 5. Estimating Betas and the [1]
Security Market Line Chapter 11,
5.1. Testing the SML
9 pp.273-288
5.2. The Non-Efficient of the “Market
portfolio”
5.3. Using Excess returns
Chapter 6. Efficient Portfolios without [1]
Short sales Chapter 12,
6.1. The Efficient frontier with short-sale pp.291-303
10
restrictions
6.2. A VBA program for the Efficient
frontier without short sales
Chapter 7. The Binomial Option Pricing [1]
11 Model
7.1. Two – date binominal pricing

3
 7.2. The multi-period binomial model Chapter 16,
7.3. Programming the Binomial Option pp.383-419
pricing model in VBA
Chapter 8: The Black-Scholes Model [1]
8.1. The Black-Scholes model Chapter 17,
8.2. Using VBA to define a Black-Scholes
12 pp.425-462
pricing function
8.3. Calculating the Volatility

Chapter 9. An Introduction to Monte Carlo [1]

Methods Chapter 24,
9.1. Computing π using Monte Carlo
13 pp.607-651
9.2. Writing a VBA program
9.3. A Monte Carlo Simulation of the
Investment problem
Chapter 10. Simulating stock prices [1]
10.1. Lognormal price distributions and Chapter 26,
geometric diffusions
14 pp.675-696
10.2. Simulating log-normal price paths
10.3. Calculating the parameters of the log-
normal distribution
Chapter 11. Monte Carlo simulation for [1]
Investments Chapter 27,
11.1 Simulating price and returns for a
15 pp.699-720
single stock
11.2 Portfolio of two stocks
11.3 Multiple stock portfolios
4.3. Contribution to Course Learning Outcomes
CLO
Topic Content Knowledge Skills Attitude
1 2 3 4 5 6 7 8 9
Chapter 1: Basic Financial
1 1 1 1
Calculations

Chapter 1: Basic Financial

2 1 1 1
Calculations (cont.)
Chapter 2: Corporate
3 1 1 1 1 1
Valuation Overview
Chapter 2: Corporate
4 Valuation Overview 1 1 1
(cont.)
Chapter 3: Calculating the
5 Weighted Average Cost of 1 1 1 1 1
Capital (WACC)

4
 Chapter 3: Weighted
6 Average Cost of Capital 1 1 1 1 1
(WACC) (cont.)
Chapter 3: Weighted
7 Average Cost of Capital 1 1 1 1
(WACC) (cont.)
Chapter 4: Calculating
8 1 1 1 1
Efficient Porfolios
Chapter 5: Estimating
9 Betas and the Security 1 1 1 1
Market Line
Chapter 6: Efficient
10 Portfolios without Short 1 1 1 1
sales
Chapter 7: The Binomial
11 1 1 1 1 1
Option Pricing Model
Chapter 8: The Black-
12 1 1 1 1 1 1
Scholes Model
Chapter 9: An Introduction
13 1 1 1 1 1
to Monte Carlo Methods

Chapter 10: Simulating

14 1 1 1 1 1
stock prices
Chapter 11: Monte Carlo
15 1 1 1 1 1
simulation for Investments
5. READING MATERIALS
5.1. Text book
1. Benninga, S., 2014. Financial modeling. MIT press.
5.2. Optional Readings
2. Winston, W.L., 2001. Financial models using simulation and optimization II:
Investment valuation, options pricing, real options & product pricing models.
Newfield, NY: Palisade Corporation.
3. Philippe, J., 2001. Value at risk: the new benchmark for managing financial risk. NY:
McGraw-Hill Professional.
6. COURSE POLICY:
The Course policy is under the current training regulations
7. COURSE ASSESSMENT
7.1. Type of Assessement
* Formative assessment (10%)
Class attendance
* Summative assessment (90%)

No. Assessment Rate

1 Mid-term exam 30%
2 Final exam 60%

5
7.2. Assessment Criteria
* Formative assessment:
(1) Class attendance:
- Attendance checking: minimum of 5 times
* Summative assessment:
(2) Extra credit (or bonus points for study encouragement):
- Given when students actively participate during lectures
- Students give their answers to the lecturer’s questions straight to the point
- 3 times: 1 bonus point for the mid-term exam, 6 times: 1 bonus point for the final exam, the
total bonus points not exceeding 2 points for mid-term exam or 1 point for final exam scores.
(3) Mid-term exam:
- Exam format: written exam in 60 minutes
- Content: issues have been studied
- The written exam can be in the form of 20 multiple-choice questions or 02 essay questions
(in which, 01 theory-based question and 01 practical question)
- Students are not allowed to use any material during the exam.
- Evaluation criteria:
+ For multiple-choice questions: students answer exactly 20 multiple-choice questions: 10
points
+ For essay questions: the maximum points for each question are 5 points, specifically:
Understand the issue 1 point
Solving the issue 1 point
Analyze the issue 1 point
Giving example 1 point
Expression 1 point
Total 5 points/ essay question
(4) Final exam
- Exam format: written exam in 60 minutes
- Content: issues have been studied
- The written exam consists of 02 parts:
+ Part 1 contains 40 multiple choice questions covering all chapters
+ Part 2 consists of 02 essay questions which require the application of knowledge in practice.
- Students are not allowed to use any material during the exam.
- Evaluation criteria:
+ For essay questions:
Concise answers to 2 essay questions: 4 points
+ For multiple-choice questions:
Correct answers to multiple choice questions: 6 points
Total: 10 points

DEAN OF FACULTY HEAD OF DEPARTMENT