Financial Simulation Modeling in Excel

Index

A

ABS (asset-backed securities), 144–45

Analysis Toolpak Add-In, 117–18

asset-backed securities (ABS), 144–45

asset pools

collateralized debt obligations, 144–52

Monte Carlo simulation and, 129–30

price movements, 133–35

transition matrices, 152–56

value at risk, 135–44

assumptions, 2–3

B

barrier level, 99–100

binomial trees, 65–69

Black-Scholes option pricing method, 69, 85–91

black swan events, 176–77

Bloomberg CRAT, 105

bootstrapping, 115, 117

boundary conditions, 182–83

Box-Muller transformation, 24–25

Brownian motion, 34–40, 176

C

C++, 174

CDOs (collateralized debt obligations), 144–52

Cholesky decomposition, 58–62, 133–34, 141–42, 147, 149

collateralized debt obligations (CDOs), 144–52

correlated random numbers, 57–62

correlation

advanced concepts, 57–62

basics, 47–50

in a financial context, 50–56

CORREL function, 48–50, 58

COUNT function, 164

COUNTIF function, 15, 17, 20–21, 55, 122–23

COUPNUM function, 120

credit default swap (CDS) market, 111–13, 115, 117

credit events, 96

credit scoring, 109–11

D

data quality

dividends and splits, 159–62

garbage in, garbage out, 157–58

illiquid products, 162–71

lack of data, 171

default simulation

bootstrapping, 115–17

credit scoring, 110–11

government issuers, 126–27

Merton model, 95–109

Monte Carlo simulations and, 130

recovery assumptions, 123–26

reduced form models, 109–10, 114–15, 117–23

structured products, 144–52

using market information, 111–14

distributions, 14–17, 19–21, 176–77. See also normal distributions

dividends, ...