Contents:

Preface Software Applications Part 1: Modeling Toolkit and Risk Simulator Applications Introduction to the Modeling Toolkit Software Introduction to Risk Simulator Running a Monte Carlo Simulation Using Forecast Charts and Confidence Intervals Correlations and Precision Control Tornado and Sensitivity Tools in Simulation Sensitivity Analysis Distributional Fitting: Single Variable and Multiple Variables Bootstrap Simulation Hypothesis Testing Data Extraction, Saving Simulation Results, and Generating Reports Regression and Forecasting Diagnostic Tool Statistical Analysis Tool Distributional Analysis Tool Portfolio Optimization Optimization with Discrete Integer Variables Forecasting 1. Analytics Central Limit Theorem 2. Analytics Central Limit Theorem Winning Lottery Numbers 3. Analytics Flaw of Averages 4. Analytics Mathematical Integration Approximation Model 5. Analytics Projectile Motion 6. Analytics Regression Diagnostics 7. Analytics Ships in the Night 8. Analytics Statistical Analysis 9. Analytics Weighting of Ratios 10. Credit Analysis Credit Premium 11. Credit Analysis Credit Default Swaps and Credit Spread Options 12. Credit Analysis Credit Risk Analysis and Effects on Prices 13. Credit Analysis External Debt Ratings and Spread 14. Credit Analysis Internal Credit Risk Rating Model 15. Credit Analysis Profit Cost Analysis of New Credit 16. Debt Analysis Asset-Equity Parity Model 17. Debt Analysis Cox Model on Price and Yield of Risky Debt with Mean-Reverting Rates 18. Debt Analysis Debt Repayment and Amortization 19. Debt Analysis Debt Sensitivity Models 20. Debt Analysis Merton Price of Risky Debt with Stochastic Asset and Interest 21. Debt Analysis Vasicek Debt Option Valuation 22. Debt Analysis Vasicek Price and Yield of Risky Debt 23. Decision Analysis Decision Tree Basics 24. Decision Analysis Decision Tree with EVPI, Minimax, and Bayes Theorem 25. Decision Analysis Economic Order Quantity and Inventory Reorder Point 26. Decision Analysis Economic Order Quantity and Optimal Manufacturing 27. Decision Analysis Expected Utility Analysis 28. Decision Analysis Inventory Control 29. Decision Analysis Queuing Models 30. Exotic Options Accruals on Basket of Assets 31. Exotic Options American, Bermudan, and European Options with Sensitivities. 32. Exotic Options American Call Option on Foreign Exchange 33. Exotic Options American Call Options on Index Futures 34. Exotic Options American Call Option with Dividends 35. Exotic Options Asian Lookback Options Using Arithmetic Averages 36. Exotic Options Asian Lookback Options Using Geometric Averages 37. Exotic Options Asset or Nothing Options 38. Exotic Options Barrier Options 39. Exotic Options Binary Digital Options 40. Exotic Options Cash or Nothing Options 41. Exotic Options Chooser Option (Simple Chooser) 42. Exotic Options Chooser Option (Complex Chooser) 43. Exotic Options Commodity Options 44. Exotic Options Currency (Foreign Exchange) Options 45. Exotic Options Double Barrier Options 46. Exotic Options European Call Option with Dividends. 47. Exotic Options Exchange Assets Option 48. Exotic Options Extreme Spreads Option 49. Exotic Options Foreign Equity Linked Foreign Exchange Options in Domestic Currency 50. Exotic Options Foreign Equity Struck in Domestic Currency 51. Exotic Options Foreign Equity with Fixed Exchange Rate 52. Exotic Options Foreign Takeover Options 53. Exotic Options Forward Start Options 54. Exotic Options Futures and Forward Options 55. Exotic Options Gap Options 56. Exotic Options Graduated Barrier Options 57. Exotic Options Index Options 58. Exotic Options Inverse Gamma Out-of-the-Money Options 59. Exotic Options Jump-Diffusion Options 60. Exotic Options Leptokurtic and Skewed Options 61. Exotic Options Lookback with Fixed Strike (Partial Time) 62. Exotic Options Lookback with Fixed Strike 63. Exotic Options Lookback with Floating Strike (Partial Time) 64. Exotic Options Lookback with Floating Strike 65. Exotic Options Min and Max of Two Assets 66. Exotic Options Options on Options 67. Exotic Options Option Collar 68. Exotic Options Perpetual Options 69. Exotic Options Range Accruals (Fairway Options) 70. Exotic Options Simple Chooser 71. Exotic Options Spread on Futures 72. Exotic Options Supershare Options 73. Exotic Options Time Switch Options 74. Exotic Options Trading-Day Corrections 75. Exotic Options Two-Asset Barrier Options 76. Exotic Options Two Asset Cash or Nothing 77. Exotic Options Two Correlated Assets Option 78. Exotic Options Uneven Dividend Payments Option 79. Exotic Options Writer Extendible Option 80. Forecasting Data Diagnostics 81. Forecasting Econometric, Correlations, and Multiple Regression Modeling 82. Forecasting Exponential J-Growth Curves 83. Forecasting Forecasting Manual Computations 84. Forecasting Linear Interpolation and Nonlinear Spline Extrapolation 85. Forecasting Logistic S-Growth Curves 86. Forecasting Markov Chains and Market Share 87. Forecasting Multiple Regression 88. Forecasting Nonlinear Extrapolation and Forecasting 89. Forecasting Stochastic Processes, Brownian Motion, Forecast Distribution at Horizon, Jump-Diffusion, and Mean-Reversion 90. Forecasting Time-Series ARIMA 91. Forecasting Time-Series Analysis 92. Industry Applications Biotech Manufacturing Strategy 93. Industry Applications Biotech Inlicensing Drug Deal Structuring 94. Industry Applications Biotech Investment Valuation 95. Industry Application Banking: Integrated Risk Management, Probability of Default, Economic Capital, Value at Risk, and Optimal Bank Portfolios 96. Industry Application Electric/Utility: Optimal Power Contract Portfolios 97. Industry Application IT Information Security Intrusion Risk Management 98. Industry Applications Insurance ALM Model 99. Operational Risk Queuing Models at Bank Branches 100. Optimization Continuous Portfolio Allocation 101. Optimization Discrete Project Selection. 102. Optimization Inventory Optimization 103. Optimization Investment Portfolio Allocation 104. Optimization Investment Capital Allocation I (Basic Model) 105. Optimization Investment Capital Allocation II (Advanced Model) 106. Optimization Military Portfolio and Efficient Frontier 107. Optimization Optimal Pricing with Elasticity 108. Optimization Optimization of a Harvest Model 109. Optimization Optimizing Ordinary Least Squares 110. Optimization Stochastic Portfolio Allocation 111. Options Analysis Binary Digital Instruments 112. Options Analysis Inverse Floater Bond 113. Options Analysis Options-Trading Strategies 114. Options Analysis Options-Adjusted Spreads Lattice 115. Options Analysis Options on Debt 116. Options Analysis Five Plain Vanilla Options 117. Probability of Default Bond Yields and Spreads (Market Comparable) 118. Probability of Default Empirical Model 119. Probability of Default External Options Model (Public Company) 120. Probability of Default Merton Internal Options Model (Private Company) 121. Probability of Default Merton Market Options Model (Industry Comparable) 122. Project Management Cost Estimation Model 123. Project Management Critical Path Analysis (CPM PERT GANTT) 124. Project Management Project Timing 125. Real Estate Commercial Real Estate ROI 126. Risk Analysis Integrated Risk Analysis 127. Risk Analysis Interest Rate Risk 128. Risk Analysis Portfolio Risk Return Profiles 129. Risk Hedging Delta-Gamma Hedging 130. Risk Hedging Delta Hedging 131. Risk Hedging Effects of Fixed versus Floating Rates 132. Risk Hedging Foreign Exchange Cash Flow Model 133. Risk Hedging Hedging Foreign Exchange Exposure 134. SensitivityGreeks 135. Sensitivity Tornado and Sensitivity Charts Linear 136. Sensitivity Tornado and Sensitivity Nonlinear 137. Simulation Basic Simulation Model 138. Simulation Best Surgical Team 139. Simulation Correlated Simulation 140. Simulation Correlation Effects on Risk 141. Simulation Data Fitting 142. Simulation Debt Repayment and Amortization 143. Simulation Demand Curve and Elasticity Estimation 144. Simulation Discounted Cash Flow, Return on Investment, and Volatility Estimates. 145. Simulation Infectious Diseases 146. Simulation Recruitment Budget (Negative Binomial and Multidimensional Simulation) 147. Simulation Retirement Funding with VBA Macros 148. Simulation Roulette Wheel 149. Simulation Time Value of Money 150. Six Sigma Obtaining Statistical Probabilities, Basic Hypothesis Tests, Confidence Intervals, and Bootstrapping Statistics 151. Six Sigma One- and Two-Sample Hypothesis Tests Using t-Tests, Z-Tests, F-Tests, ANOVA, and Nonparametric Tests (Friedman, Kruskal Wallis, Lilliefors, and Runs Tests) 152. Six Sigma Sample Size Determination and Design of Experiments 153. Six Sigma Statistical and Unit Capability Measures, Specification Levels, and Control Charts 154 Valuation Buy versus Lease. 155. Valuation Banking: Classified Loan Borrowing Base 156. Valuation Banking: Break-Even Inventory with Seasonal Lending Trial Balance Analysis 157. Valuation Banking: Firm in Financial Distress 158. Valuation Banking: Pricing Loan Fees Model 159. Valuation Valuation Model 160. Value at Risk Optimized and Simulated Portfolio VaR 161. Value at Risk Options Delta Portfolio VaR 162. Value at Risk Portfolio Operational and Credit Risk VaR Capital Adequacy 163. Value at Risk Right-Tail Capital Requirements 164. Value at Risk Static Covariance Method 165. Volatility Implied Volatility 166. Volatility Volatility Computations (Log Returns, Log Assets, Implied Volatility, Management Assumptions, EWMA, GARCH) 167. Yield Curve CIR Model 168. Yield Curve Curve Interpolation BIM Model 169. Yield Curve Curve Interpolation NS Model 170. Yield Curve Forward Rates from Spot Rates 171. Yield Curve Term Structure of Volatility 172. Yield Curve U.S. Treasury Risk-Free Rates and Cubic Spline Curves 173. Yield Curve Vasicek Model Part 2: Real Options SLS Applications 174. Introduction to the SLS Software 175. Employee Stock Options Simple American Call Option 176. Employee Stock Options Simple Bermudan Call Option with Vesting 177. Employee Stock Options Simple European Call Option 178. Employee Stock Options Suboptimal Exercise 179. Employee Stock Options Vesting, Blackout, Suboptimal, Forfeiture 180. Exotic Options American and European Lower Barrier Options 181. Exotic Options American and European Upper Barrier Options 182. Exotic Options American and European Double Barrier Options and Exotic Barriers. 183. Exotic Options Basic American, European, and Bermudan Call Options 184. Exotic Options Basic American, European, and Bermudan Put Options 185. Real Options American, European, Bermudan, and Customized Abandonment Options 186. Real Options American, European, Bermudan, and Customized Contraction Options 187. Real Options American, European, Bermudan, and Customized Expansion Options. 188. Real Options Contraction, Expansion, and Abandonment Options 189. Real Options Dual Variable Rainbow Option Using Pentanomial Lattices 190. Real Options Exotic Chooser Options 191. Real Options Exotic Complex Floating American and European Chooser 192. Real Options Jump-Diffusion Option Using Quadranomial Lattices 193. Real Options Mean-Reverting Calls and Puts Using Trinomial Lattices 194. Real Options Multiple Assets Competing Options 195. Real Options Path-Dependent, Path-Independent, Mutually Exclusive, Non Mutually Exclusive, and Complex Combinatorial Nested Options 196. Real Options Sequential Compound Options 197. Real Options Simultaneous Compound Options 198. Real Options Simple Calls and Puts Using Trinomial Lattices Part 3: Real Options Strategic Case Studies Framing the Options 199. Real Options Strategic Cases High-Tech Manufacturing: Build or Buy Decision with Real Options 200. Real Options Strategic Cases Oil and Gas: Farm-Outs, Options to Defer, and Value of Information 201. Real Options Strategic Cases Pharmaceutical Development: Value of Perfect Information and Optimal Trigger Values 202. Real Options Strategic Cases Option to Switch Inputs 203. Valuation Convertible Warrants with a Vesting Period and Put Protection. APPENDIX A: List of Models APPENDIX B: List of Functions APPENDIX C: Understanding and Choosing the Right Probability Distributions. APPENDIX D: Financial Statement Analysis APPENDIX E: Exotic Options Formulae APPENDIX F: Measures of Risk APPENDIX G: Mathematical Structures of Stochastic Processes Glossary of Input Variables and Parameters in the Modeling Toolkit Software About the DVD About the Author Index

Summary:

An in-depth guide to advanced analytical models More practitioners are turning to financial modeling to quantitatively estimate the value of a security. Advanced Analytical Models offers a comprehensive set of 250 models that cover a wide range of industries and applications, including banking, manufacturing, military, pharmaceutical, financial services, oil and gas, operations research, risk simulation, portfolio optimization, and forecasting. The book includes a companion DVD that discusses all the models covered in the book and contains numerous informative case studies that will help readers apply the information they've learned in real-world situations.

Author

Johnathan Mun (Pleasanton, CA) is currently the founder and CEO of Real Options Valuation, Inc., as well as the creator of the Real Options Super Lattice Solver software for real option valuation and Risk Simulator Monte Carlo simulation software. Prior to starting his own firm, he was the vice president of analytics at Decisioneering, Inc. Mun is also a Full Professor at the U.S. Naval Postgraduate School (California) and the University of Applied Sciences (Switzerland and Germany). He has authored numerous books, including Real Options Analysis, Real Options Analysis Course, Modeling Risk (previously titled Applied Risk Analysis before revision and updates), and Valuing Employee Stock Options (all published by Wiley). Mun has also taught and consulted for more than 300 corporations in twenty countries worldwide on risk analysis and real options, and is considered a leading authority on real options and risk analysis.