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Building Financial Risk Models in Excel

A quick reference guide to building financial risk models in Excel.

When was the last time you had to build a financial risk model in Excel? Do you remember wishing for a step by step guide? A model template? A translation of the differential equation from continuous to discrete spreadsheet friendly implementation? A risk spreadsheet that you could actually follow? From Option pricing to Value at risk; from Asset Liability Management to Treasury profitability analysis financial risk Excel spreadsheets simplify our lives and make it possible for us to generate and test answers and analysis.

Option Pricing using Monte Carlo Simulation – Pricing a lookback option

 

We do this by providing high level views of spreadsheet models; discrete spreadsheet friendly implementations and quite frequently a step by step guide to building a financial risk model.

The financial risk model spreadsheet guide is for do it yourself (DIY) types. If you enjoy building and testing models in Excel, you will find quite a few quick reference posts. If you don’t this is probably the last page you would want to spend time on.

The collection represents everything we have written on building risk, portfolio and banking spreadsheet models over the last three years. The content is structured and organized based on topic popularity. The posts are generally short on text and words and long on content and value. The earlier editions are all in byte sized pieces and sometimes a bit awkward, the later editions are lengthier and easier to read and follow.

Enjoy.

 

   Risk model spreadsheets – Commodity Pricing Models for Oil & Gold

A guide to calculating trailing volatility and correlation followed by a short post that tries to tackle the Gold bubble question? Is Gold over valued? What can the relative pricing model tell us?

WTI Crude Oil daily return series

 

   Risk model spreadsheets – Asset Liability Management

A short guide to Asset Liability Management reporting templates, assumptions and conventions including a review of building Maturity and Liquidity gaps.

ALM Model

 

Forecast interest rates using one and multi-factor models in EXCEL

Interest Rate Models – CIR

Interest Rate Models – BDT

Interest Rate Models – HJM

   Risk model spreadsheets – Value at Risk, Correlation, Volatility

Value at Risk

Correlation

Market Risk Metrics

   Risk model spreadsheets – Monte Carlo Simulation

Using Monte Carlo Simulation to simulate oil prices, market prices, fuel consumption and fuel hedging results.

Simulating the distribution

Simulation Model inputs

   Risk model spreadsheets – Option Greeks – Delta Hedging

If the Greeks had you confused, we have the perfect Rosetta Stone for you. Bring Monte Carlo Simulation and good old fashioned accounting together to decode Delta, Gamma, Vega, Theta and Rho.

Option Greeks – Vega & Moneyness – Hedging higher order Greeks

   Risk model spreadsheets – Option Pricing

The big, thick, fat collection of posts on Option pricing

Forward prices and rates

Pricing Exotics

Modeling the Term structure, zero curve and forward curve

Pricing Swaps – Part 1

Pricing Swaps – Part 2

Binomial tree

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