Risk Model.

Risk model. All you can read & build quick reference guide to spreadsheets.

When was the last time you had to build a 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 Excel spreadsheets simplify our lives and make it possible for us to generate and test answers and analysis.

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 model.

The 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.


Figure 1 Option Pricing using Monte Carlo Simulation – Pricing a lookback option


Risk model spreadsheets Commodity pricing models – 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?

Figure 2 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.

Figure 3 ALM Model

Risk model spreadsheets – Value at Risk, Correlation, Volatility

Volatility and value at risk. Cases, examples and sample exams.

Figure 4 Trailing volatility

Value at Risk


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.

Figure 5 Simulating the distribution

Figure 6 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.

 Figure 7 Delta hedging & greeks

  1. Understanding Delta Hedging for options using Monte Carlo Simulation
  2. Dynamic Delta Hedging – Extending the Monte Carlo simulation model to Put contracts
  3. Dynamic Delta Hedging – Calculating Cash P&L (Profit & Loss) for a Call Option writer
  4. Hedging Gamma & Vega – The higher order Greeks hedge optimization Excel spreadsheet
  5. Delta Hedging applications for Rho, Rebalancing frequency & Implied Volatility
  6. Option Greeks – Dissection Theta and time premiums for call options


Risk model spreadsheets – Interest Rate models – CIR, BDT, HJM

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 – Option pricing

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

Risk model spreadsheets – Binomial tree

  1. Pricing European Call options
  2. Pricing European Put Options
  3. Pricing American Options – Calls and Puts
  4. Pricing Knockout, Sudden Death Options – Down and out call options
  5. Pricing Sudden death Options – Down and in call options

Value at Risk - TrainingTreasury Training
ALM Crash Course PDF & Excel package