Financial modeling is the task of building an abstract representation (a model) of a financial decision making situation. This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project, or any other investment. Financial modeling is a general term that means different things to different users; the reference usually relates either to accounting and corporate finance applications, or to quantitative finance applications. While there has been some debate in the industry as to the nature of financial modeling - whether it is a tradecraft, such as welding, or a science - the task of financial modeling has been gaining acceptance and rigor over the years. Typically, financial modelling is understood to mean an exercise in either asset pricing or corporate finance, of a quantitative nature. In other words, financial modelling is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions; for example, a firm's decisions about investments (the firm will invest 20% of assets), or investment returns (returns on "stock A" will, on average, be 10% higher than the market's returns). ...
Other articles related to "financial modeling, financial, modeling":
... In quantitative finance, financial modeling entails the development of a sophisticated mathematical model ... A key distinction is between models of the financial situation of a large, complex firm or "quantitative financial management", models of the returns of different stocks or "quantitative asset pricing ... of their "Greeks" Other derivatives, especially Interest rate derivatives and Exotic derivatives Modeling the term structure of interest rates (short rate modelling) and credit spreads ...
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