DEFINITION of 'Financial Modeling'
The process by which a firm constructs a financial representation of some, or all, aspects of the firm or given security. The model is usually characterized by performing calculations, and makes recommendations based on that information. The model may also summarize particular events for the end user and provide direction regarding possible actions or alternatives.
INVESTOPEDIA EXPLAINS 'Financial Modeling'
Financial models can be constructed in many ways, either by the use of computer software, or with a pen and paper. What's most important, however, is not the kind of user interface used, but the underlying logic that encompasses the model. A model, for example, can summarize investment management returns, such as the Sortino ratio, or it may help estimate market direction, such as the Fed model.

Sortino Ratio
A modification of the Sharpe ratio that differentiates harmful ... 
Decision Analysis  DA
A systematic, quantitative and visual approach to addressing ... 
Local Volatility
A model used in quantitative finance to calculate the unpredictability ... 
Stochastic Volatility  SV
A statistical method in mathematical finance in which volatility ... 
Black Scholes Model
A model of price variation over time of financial instruments ... 
HeathJarrowMorton Model  HJM ...
A model that applies forward rates to an existing term structure ...

What percentage of a diversified portfolio should be exposed to the insurance sector?
It is beneficial to innovate financial models and techniques used in quantitative analysis to improve performance and adapt ... Read Full Answer >> 
What is the difference between financial forecasting and financial modelling?
The difference between financial forecasting and financial modeling is that the former is the process in which a company ... Read Full Answer >> 
What does the rule of 70 indicate about a country's future economic growth?
The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >> 
How is the rule of 70 related to the growth rate of a variable?
The rule of 70 is related to the growth rate of a variable because it uses the growth rate in its approximation of the number ... Read Full Answer >> 
What are the benefits of using ceteris paribus assumptions in economics?
Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >> 
What is the difference between the rule of 70 and the rule of 72?
The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>

Markets
Digging Into The Dividend Discount Model
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Professionals
Get An Academic Finance Career
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Professionals
Style Matters In Financial Modeling
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Fundamental Analysis
Calculating Future Value
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Economics
What is Deadweight Loss?
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Economics
How to Do a CostBenefit Analysis
The benefits of a given situation or businessrelated action are summed and then the costs associated with taking that action are subtracted. 
Fundamental Analysis
Calculating the HerfindahlHirschman Index (HHI)
The HerfindhalHirschman Index, (HHI) is a measure of market concentration and competition among market participants. 
Investing
How To Implement A Smart Beta Investing Strategy
Smart beta investing is the notion of rewriting investment rules to improve investment outcomes by targeting exposures to intuitive ideas or factors. 
Forex
The Pros & Cons Of A Strong Dollar
As the U.S. economy has emerged from the Great Recession, the strength of the U.S. dollar has also improved. 
Investing
Market Crisis: Does Diversification Still Work?
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