Financial Modelling Workshop  Analysis, Measurement and Valuation
Duration: 2 days
 Review of Basic Financial Mathematics
 Probability Analysis and Statistical Methods
 Basic Risk Measures
 Performance Measurement
 Total Return Analysis
 The Economics of Project Finance
The objective of this highly practical PCbased workshop is to give you a good understanding and
handson experience with tools and techniques used in financial modelling and investment analysis.
First, we give a review of the basic mathematical and statistical concepts that are widely used in the
field of finance. We explain concepts such as “Time Value of Money”, variance and standard deviation
and other descriptive statistics. We also present and explain a variety of probability measures and
statistical tools such as regression analysis and random number generation.
The remaining part of the workshop is divided into four practical “sessions”.
In session one, we present and explain a number basic risk measures that are used in the risk
assessment of equity and fixed income investments. The measures include sensitivity measures such as
beta for stocks and modified duration and convexity for bonds, as well as statistical risk measures
derived from estimated loss distributions, such as “ValueatRisk”.
In session two, we look at measures of investment performance, including “timeweighted” and
“moneyweighted” return and various measures of riskadjusted and relative performance.
In session three, we explain how “total return analysis” can be used to rank alternative investments,
based upon explicit assumptions about horizon yields and prices, reinvestment rates, dividend growth
and other inputs.
Finally, in session four, we look at the economics of “project finance”. We explain how a project is
set up and organized, and we explain and present a number of methods and key ratios for evaluating the
costs, benefits and risk of projects.
The individual sessions will be designed as a mix of theoretical presentations, practical examples and
cases, and “handson” exercises. Participants are requested to bring their own laptop.
Day One
09.00  09.15 Welcome and Introduction
09.15  12.00 Review of Basic Financial Mathematics
 Time Value of Money and Cash Flow Analysis

Descriptive Statistics
 Mean, variance, standard deviation, skewness, kurtosis,…
 Probability Analysis

Statistical Tools
 Regression analysis, random number generation,…
 Small Exercises
Session 1: Basic Risk Measures
 Building Blocks in Risk Analysis

Sensitivity Measures for Equity Investments
 Alpha, Beta and factor sensitivities

Sensitivity Measures for FixedIncome Investments
 Duration, modified duration, convexity, keyrate duration

Statistical Measures of Risk
 ValueatRisk, EarningsatRisk, CapitalatRisk,..
 Practical Examples
 Workshop
12.00  13.00 Lunch
13.00  16.30 Session 2: Performance Measurement

Measuring Return
 Arithmetic and geometric returns

OneDimensional Measures of Performance
 Internal rate of return
 Moneyweighted return
 Timeweighted return

RiskAdjusted Measures of Performance
 Treynor index
 Sharpe index
 Sortino ratio
 Lower partial moments

Relative Measures of Performance
 Tracking error
 Information ratio
 Workshop
Day Two
09.00  09.15 Recap
09.15  12.00 Session 3: Total Return Analysis (Horizon Analysis)
 Purpose of Total Return Analysis
 “Total Return” Concept
 Assessing Reinvestment Risk
 Assessing Principal Risk
 Calculating Expected Return
 Sensitivity Analysis

Switch Analysis (Bonds)
 Arbitrage switch
 Duration switch
 Convexity switch
 Spread trades
 Using Total Return Analysis in Constructing Optimal Portfolios
 Workshop

Total Return Analysis for Equity Investments
 Assessing residual value
 Estimating total return and risk
 Constructing optimal portfolios
 Workshop
12.00  13.00 Lunch
13.00  16.30 Session 4: The Economics of Project Finance

Introduction to Project Finance
 Definition
 Rationale and motives
 Characteristics
 Structuring Projects
 Typical Financing Structure
 Typical Structure for Allocation of Risk
 Valuing Projects
 Analyzing Debt Capacity
 Analyzing Debt Sensitivities
 Managing Project Risk
 Case Study: The A2 Motorway
 Workshop
Evaluation and Termination of the Workshop
