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The Basics of Financial Modeling by Jack Avon

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CHAPTER 6

Designing and Building Your Model

The design of the model is all about ensuring that the physical model will work once it is built and will actually function in the manner that is expected in the planning.

How the model is designed will be influenced by the ability of the modeler to translate requirements of the model sponsor into a methodical modeling project. This means prior to designing the model, the modeler must look at aspects such as:

  • The impact of the requirements on the three key modeling concepts: inputs, calculations, and outputs.
  • The intended use of the model. This will determine if it will be a deterministic-type model (a deterministic model is one that, given a fixed set of inputs, always produces the outputs), or a ...

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