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S1 Financial Modeling With Python and Excel

This document introduces financial modeling and the tools of Python and Excel that will be used in the course. It discusses what financial modeling is, gives examples of common modeling problems, and explains why Python and Excel are good choices for modeling. Python is highlighted as a good option for finance due to its flexibility, popularity, and integration with Excel. Both tools have advantages and disadvantages, so the course will aim to utilize the strengths of each.

Uploaded by

Hamid Ilyas
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© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
98 views

S1 Financial Modeling With Python and Excel

This document introduces financial modeling and the tools of Python and Excel that will be used in the course. It discusses what financial modeling is, gives examples of common modeling problems, and explains why Python and Excel are good choices for modeling. Python is highlighted as a good option for finance due to its flexibility, popularity, and integration with Excel. Both tools have advantages and disadvantages, so the course will aim to utilize the strengths of each.

Uploaded by

Hamid Ilyas
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Intro Tools and Skills

Financial Modeling with Python and Excel


An Introduction

Nick DeRobertis1
1 University of Florida

Department of Finance, Insurance, and Real Estate

June 9, 2021

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Intro Tools and Skills

Table of Contents

1 Introduction to Financial Modeling

2 Introduction to the Modeling Toolset

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Intro Tools and Skills

What is this Class?

This is a skills-based course


focused on teaching financial
modeling techniques in Python
and Excel

The focus is not a lot of specific


models, but rather general
model-building techniques

The focus will be simple models,


but extending them in powerful
ways

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Intro Tools and Skills

What is a Model?

Inputs Model Outputs

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Intro Tools and Skills

A Retirement Problem
A General Structure

Inputs Process Outputs

Real-world Problem

Cash in the
Wages, Savings Investment bank, person
retires

A Model of the Problem


Cash Flows, Savings FV of CF, time
Model
Rate, Interest Rates until retirement
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Intro Tools and Skills

Valuing a Company (DCF Model)


A General Structure

Inputs Process Outputs

Real-world Problem

Microsoft Generates cash for


creates soft- Sells the software investors, stock
ware reaches a price

A Model of the Problem


Revenue, COGS,
Stock price,
SG&A, growth rates, Model
stock returns
costs of capital, etc.
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Intro Tools and Skills

Table of Contents

1 Introduction to Financial Modeling

2 Introduction to the Modeling Toolset

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Intro Tools and Skills

Why Python?

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Intro Tools and Skills

Python is a Good Choice for Finance

The easiest to learn mainstream programming language

Heavily used in the financial industry

Python is the Most Flexible of the Top Languages

Modeling Devices
Data science Web Development
Algorithmic Trading Web Scraping
Scripting Even these slides

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Intro Tools and Skills

Python is the Fastest Growing Programming Lanugage

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Intro Tools and Skills

More Python Advantages

Open source - completely free and open

Focus on readability - almost pseudo-code

Take as much as you need. Easy for beginners, many features for
experts.

Deep integrations with Excel - VBA replacement, run Python in


Excel, run Excel from Python

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Intro Tools and Skills

Why Not use Python?

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Intro Tools and Skills

Python Disadvantages

No graphical interface (by default)

Hard to get others working with it if they don’t know Python

Can take more work to get started on a project

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Intro Tools and Skills

Why Not use VBA?

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Intro Tools and Skills

VBA is Old-School

Code is not as readable as


Python

Power is limited to working


within Microsoft Office

Python has a complete VBA


API built into a package -
Python can do VBA and more

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Intro Tools and Skills

We Can’t Ditch Excel Yet

Excel is everywhere. Most of the world’s data is in Excel spreadsheets

(Nearly) everyone knows how use it

You can see what you’re doing (without effort)

Easy introspection into a particular value

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Intro Tools and Skills

Escaping Excel Hell

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Intro Tools and Skills

The Pains of Excel

Code and view are mixed together, code is hidden

Both cell formulas and VBA macros - What is going on?

Easy to make mistakes (one cell different)

Some tasks which are very simple in Python are very complex in Excel

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Intro Tools and Skills

Let’s Get Python Set Up on your System

Install Steps
1 Go to https://www.anaconda.com/products/individual to download
Python 3.8
2 Follow the steps in the installer
3 You will hit ”Advanced Installation Options”. It is very important that you
select ”Add Anaconda to my PATH environment variable”. It says it is not
recommended, and will highlight it in red when checked, but we will need it
later in the course.
4 Open CMD (windows key, search cmd)
5 Type python and hit enter. You should see Python 3.8 and a >>> come up.

Make sure you have selected Python 3.8 and not 2.7

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Lecture Resources

Lecture Resources
1 Syllabus
2 Course Schedule
3 Slides - Financial Modeling with Python and Excel
4 Lecture Notes - Financial Modeling with Python and Excel

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