The purpose of this book is to educate the reader to design and implement their own models of the relationships between important variables in financial markets. With this aim in mind we have provided a CD that contains examples of many of the models that are described in the text.

All Excel workbook applications are designed for use with Excel 2000 (or higher versions when available). Excel 97 or previous versions will not be able to run most of the spreadsheets. The Excel spreadsheets and figures are password protected. Readers may obtain the password by registering here

Minimum specifications required for the successful operation of this CD content are:
Pentium class processor
Windows 95 or later with 20MB RAM or Windows NT4.0 or later with 36MB RAM
CDROM Drive
50MB Hard Disk Space

The spreadsheets in the Excel Workbooks folder have been written specifically for the book by two outstanding students from the Financial Engineering and Quantitative Analysis (FEQA) MSc course at the ISMA Centre, University of Reading: Steffen Hennig and Sujit Narayanan.

The reader may wish to use the visual basic code in these programs as a basis for their own working models, but it should be stressed that the CD is provided free and for educational purposes only. It is not guaranteed to work and no additional software or hardware support will be given to the user. Neither are the spreadsheets guaranteed to be free of errors.

If you have some experience with model development you will know that it takes a long time to spot all the bugs in a new software application. I have, in fact, already found two small errors in the excel workbooks:

In the Covariance VaR excel workbook there is a small bug that appears when you change the length of data period (days). The run time error '9': subscript out of range will appear in a dialogue box. Choose the (default) option 'debug' and you will see the offending code highlighted:

Worksheets("covar var").Activate

Change this to:

Worksheets("covariance var").Activate

Then close the visual basic editor. Press 'OK' to 'This command will stop the debugger'.

In the Risk Decomposition excel workbook there is an error in the formula for calculating the volatility due to the market. Download a new version of this spreadsheet here (left click to open or right click to, Save Target As).

Any further errors should be reported to the market models user discussion forum. It is hoped that this forum will provide a basis for users to exchange ideas on the aspects of model development that are covered in the text.

The PCA by Optimization file contains illustrations of the optimization approach to principal component analysis, with spreadsheet written by my esteemed colleague at the ISMA Centre, Ubbo Wiersema.

The CD also includes free demonstration versions of commercial software that are particularly relevant to the subjects covered in the book. It contains a fully functional version of the OxMetrics software suite: PcGive, PcGets and STAMP. This is limited only by the data that it can use and has all the facilities of these software packages available. In addition to the standard OxMetrics tutorial files, this version has been tailored to work on some of the data used in the book. Dr. Jurgen Doornik, of Nuffield Colledge, Oxford has kindly provided a tutorial on the models that are developed in Chapter 4 (GARCH models). For more details about OxMetrics see www.nuff.ox.ac.uk/Users/Doornik . The CD also contains some excel add-ins provided by Dr. Mamdouh Barakat of MB Risk Management. Mamdouh has tailored two of the Universal Add-ins to data used in Chapters 4 (GARCH models) and Chapter 6 (Principal Component Analysis). To use these, Mamdouh has given readers a free 30-day trial of the Universal Add-in software suite. For more details about these see www.mbrm.com

There are approximately 230 figures in this book and more than a few have had their glorious Technicolor suppressed by the confines of monochrome print. An appealing feature of the CD is that it contains the original colour versions of these figures, with supporting data.

Two of the Colour Figures have the wrong number in their title:

Figure 7.12: Orthogonal GARCH Term Structure Volatility Forecasts for 1mth Crude Oil Futures

Should read:

Figure 7.11: Orthogonal GARCH Term Structure Volatility Forecasts for 1mth Crude Oil Futures

And

Figure 7.13: Some of the Correlations from the Orthogonal GARCH Model

Should read

Figure 7.12: Some of the Correlations from the Orthogonal GARCH Model

Carol Alexander
Author: Market Models