The Hindu Business Line : Excel in modelling skills

Financial modelling is an essential skill for finance professionals and students. Excel and its built-in programming language, Visual Basic for Applications (VBA), are the preferred tools for the job.

COMBINE knowledge of finance with a dash of mathematics, and add a heavy dose of Excel and VBA. What do you get? Modelling skill. That's the promise of Chandan Sengupta in Financial Modeling Using Excel and VBA, published by Wiley Finance (www.wiley.com) . "Financial modelling is an essential skill for finance professionals and students, and Excel and its built-in programming language, Visual Basic for Applications (VBA), are the preferred tools for the job."

The book, with over 75 "real-world financial models", presumes no prior knowledge of VBA. "The key is to learn VBA as a language the same way you learned your mother tongue - by imitating how to say things you want to say, without worrying about learning all the rules of grammar or trying to acquire a large vocabulary that you do not need," cajoles Chandan.

"You will be surprised to find out how little you have to learn to be able to develop models with VBA that are often more useful, powerful, and flexible than Excel models."

What is a financial model? Here is a simple answer that the author offers: "It is designed to represent in mathematical terms the relationships among the variables of a financial problem so that it can be used to answer `what if' questions or make projections."

He explains how till not long ago speed and memory limitations of PCs made modelling tough. "With advances in PCs and improvements in Excel itself, the table has now turned completely." Most Excel features are designed to be intuitive, says the book. "If you understand what a feature is supposed to do, you may be able to figure out how it works just by trial and error."

Okay, how does one build good Excel models?

Check if they have the following attributes: realistic, error-free, flexible, easy to use, easily understandable formulas, judicious formatting, appropriate number formatting, minimum hard coding, well-organised and easy to follow, good output production, proper documentation and data validations.

"One great advantage of Excel is that it makes documenting a model convenient. If your model is well-organised, tables have clear titles, footnotes, and column and row labels, important variables have descriptive names, formulas are easy to read and understand, and so on, then it may require very little additional documentation." Enough inputs for finance people to find solutions for problems that their systems staff have been finding too tough to touch.

On the brink of a mind makeover

TWENTY-FIRST century technology is changing the way we think and feel. Take for instance `e-mail flirting'. It is "growing in popularity," writes Susan Greenfield in her book Tomorrow's People, published by Penguin (www.penguin.com) .

Reason: "It emphasises fun rather than a serious relationship, and fun is the order of the day."

A primitive prototype for virtual flirting, that the book mentions, is `Mamjam', using which one can send messages from bars and clubs to total strangers - "the service connected according to their proximity".

The author, a neuroscientist, states that we are standing "on the brink of a mind makeover more cataclysmic than anything in our history".

The coming age of IT, according to her, offers "a raft of possibilities from conscious automata to self-assembling autocrats to carbon-silicon hybrids." Be warned: "Soon computers will be invisible and ubiquitous - if not actually inside our bodies and brains then sprinkled throughout our clothes, in our spectacles and watches, and converting the most unlikely inanimate objects into `smart' interactive gadgets." How is IT going to affect our mood?

A feel-good scenario is that we will be `readily expressed'; workforce would be multifaceted, with no cultural baggage. The worst-case scenario talks of loss of professional identity, fall in self-esteem, an increase in passive role and "even the loss of a sense of self altogether".

With the globalisation of technology would come advantages too.

"Cost of literacy would drop dramatically - every village could have its own electronic library." Don't wait till then to read the book.

ACID to LOB and four drivers

JAVA lets you access databases using Java Database Connectivity (JDBC) API, "a standard supported by all major database vendors, including Oracle." To know how to write JDBC programs for the Oracle environment, Jason Price provides inputs in Oracle 9i JDBC Programming, published by Tata McGraw-Hill (www.mcgrawhill.com) . After introducing readers to JDBC, Oracle, SQL, the book advances to `result sets', PL/SQL, database objects, collections, large objects and so on. Part III is on `deploying Java', while part IV discusses `performance'.

On roads there are different types of drives; just so in Oracle JDBC also. There is a thin driver that has the smallest footprint, that is, it requires "the least amount of system resources to run"; OCI driver is suitable for "programs deployed on the middle tier such as a Web server"; server-side internal driver provides "direct access to the database"; and server-side thin driver "provides access to remote databases."

Prior to Oracle8, one had to store large blocks of character data using LONG database type; and for big binary data, it was LONG RAW.

But now databases serving multimedia applications have to accommodate images, sounds, and video. Then Larry Ellison lobbed in LOB (large object) as a new class type. "JDBC supports three LOBs: CLOB, BLOB and BFILE". For the uninitiated, the chapter on `advanced transaction control' would confront with ACID - the four fundamental properties that a transaction has to have.

Not debit and credit, as essential transaction accounting aspects, but atomicity, consistency, isolation and durability.

ACID ensures that there are "extensive recovery facilities for restoring databases that may have crashed for one reason or another."

A separate chapter handles `performance tuning' - to reduce the amount of time taken for your program to complete.

To perfect your work, you may have to do `row prefetching' - that is, specifying "the number of rows that are to be fetched into a result set during each round trip to the database."

But first, go to fetch the book, unless somebody had prefetched it for you.

Tailpiece

Overheard outside the BSE:

"What's EFT?"

"If you add `L', I may explain better."

Books2Byte@TheHindu.co.in

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Excel in modelling skills