In this section, we present suggested articles and books related to financial models and analysis.

• The Craft of Strategy Formation: Translating Business Issues into Actionable Strategies

  In this book the authors present an approach to strategy formation. They describe a four stage process: preparation, analysis, decision making and implementation. It is a book about the conduction of a strategic formulation project, not about strategic frameworks. Chapter 14, which is about financial modeling as a support for strategic decision making is particularly interesting.

• 20/20 Foresight - Crafting Strategy in an Uncertain World

  Hugh Courtney

  Courtney presents methodology for how managers can make decisions in an environment of uncertainty. He proposes classifying uncertainty into four categories and suggests a different approach for each case.

• The Misbehavior of Markets: A Fractal View of Financial Turbulence

  Benoit Mandelbrot, Richard Hudson

  Application of the fractal theory to finance, written by the creator of fractals Benoit Mandelbrot. This book exposes the vulnerabilities of many of the bases of mainstream financial theory. Recommended for all who work with finance and risk management.

• The Flaw of Averages

  Sam Savage, Harvard Business Review

  In this short article the author shows how trusting averages can lead to wrongful decisions. It offers a simple and intuitive view of the importance of methods such as Monte Carlo Simulations to financial analysis and decision making in general. We can certainly use averages in many cases, but it is important to be aware of situations where there may be pitfalls.

• Debate: Value-at-Risk

  Because of the current financial crisis, risk management is in the spotlight. Both the following articles pose questions and critiques of Value-at-Risk, a quantitative method of risk assessment. Especially recommended to people who use the method so that they may become me familiar with its critiques, limitations and applications.

  It describes the debate between Philipe Jorion, specialist and supporter of VaR, and Nassim Taleb, author of the book “The Black Swan” and fierce critic of the VaR techniques, about the vulnerabilities of the Value-at-Risk (VaR) technique. It is particularly interesting as the discussion took place in April, 1997, when the financial markets were at a relative lull.

  Joe Nocera, from the New York Times, also wrote about the polemic Value-at-Risk technique.

• Webpage: Damodaran On-line

  Aswath Damodaran

  A Professor at NYU's Stern School of Business, Damodaran is the author of several books on finance and a worldwide reference on the topic. His website contains many articles on finance, as well as useful data for financial analysis.

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