1. Introduction to Financial Modelling

Definition

A model is a program which has been developed to copy the way a system works in real life.

It uses mathematical formulas and calculations to predict what is likely to happen based on data recorded about what actually did happen in the past.

The reason people use modelling and Financial Modelling in particular is that they want to Financial Modellingpredict the future.

This is done by carefully setting up a model that they think will do this.

I say 'think' because sometimes setting up a complicated financial model is as much an art as science!

This mini-web will cover this topic.