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Corporate finance risk analysis

Duration: 3 days

Course overview

The course familiarizes you with risk analysis modeling environments (in this case ModelRisk with Excel, but the lessons apply equally well to other modeling environments).

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Course objective

The course will give you the ability to conduct, present and critique financial risk analysis that uses the latest methods. Concepts and topics covered in this course include the fundamentals of model building, probability theory, Monte Carlo simulation (using ModelRisk or other modeling environment e.g. @RISK, Crystal Ball,…), using expert opinion, times-series modeling, including risk in NPV analysis and real option analysis.

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Training material

We will provide lecture notes both in hardcopy and on CD. This CD also contains all model files produced for the course. Any extra models developed during the course are downloadable from a private course website.

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Course format

The course runs from 9:00 am to 5:00 pm each day. Morning and afternoon coffee, and lunch are provided. Optional evening workshops on the first and second days allow extra time for running through example models and exercises.

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Who should attend

The course covers the basics of financial risk modeling, and is ideally suited to corporate finance professionals, M&A analysts, risk managers, management consultants, and corporate strategy planners. Financial risk analysis tools can be applied in a very wide range of industries (from venture capital to the pharmaceutical industry, oil and gas, banking and retail) and to numerous capabilities such as new product and business development, corporate finance, strategy, marketing and mergers and acquisitions.

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Prerequisites

All models are developed using Excel and ModelRisk, and some examples with the R statistical language are provided. It is essential that all participants are reasonably proficient in Excel (see prerequisites). oth courses are very intensive so, to save time, it is important to make themselves familiar with the basic principles of ModelRisk by going through the on-line tutorial and Quick Start Guide.

Lessons apply equally to @RISK, Crystal Ball and other Monte Carlo simulation packages. Participants are able to also take our courses with other Monte Carlo simulation packages, even though a lot of the techniques and methods will be easier to implement using ModelRisk. The limited features of other tools will restrict the ability to complete some of the exercises. For more details please visit http://www.vosesoftware.com/content/compare.pdf

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Laptops

Participants are required to bring laptops loaded with Microsoft Word, Microsoft PowerPoint and Microsoft Excel and Vose Software's ModelRisk installed, and with a CD drive. A trial copy of ModelRisk is available free of charge from the Vose Software web-sites but these should not be installed too early as trial versions run out after 30 days.

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ModelAssist

ModelAssist from Vose Consulting is a comprehensive risk analysis training and reference software tool. ModelAssist provides an in-depth explanation of all of the risk analysis concepts, techniques and methods introduced in this course and greatly complements the course material. It is particularly helpful as a reference for participants of the material that has been presented during the course.

ModelAssist will be available to participants at a reduced price.

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Teaching philosophy

All of Vose Consulting's courses aim to help the participants understand (rather than 'learn') risk analysis, which can only be achieved through a relaxed, informal and interactive environment, through plenty of examples and hands-on exercises where students apply and adapt what they have learned. We believe that:

"When you hear something, you forget it.
When you see something, you remember it.
But not until you do something will you understand it"

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Course content

Day 1

  • Introduction to ModelRisk/Excel or Crystal Ball/Excel or @RISK/Excel and risk modelling
  • Introduction to probability theory and statistics
  • Building models and using the results - some simple finance examples
  • Presenting risk analysis results, sensitivity analysis, stress analysis, goal seek
  • Evening workshop: models and exercises

Day 2

  • Using data to determine probability distributions
  • Using expert opinions to determine distributions
  • Using Central Limit Theorem
  • An insurance problem
  • Portfolio optimisation problem
  • More involved finance problems
  • Evening workshop: models and exercises

Day 3

  • Modelling correlation
  • The most common modelling errors
  • Time series modelling and forecasting
  • Using simulation with discounted cashflow models
  • Real option evaluation

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