Financial model

A simplified representation of a financial situation, using a selected set of assumptions and relationships.

Financial models are widely used in practice for valuation and to support financial decisions and risk management.

Models are also a valuable tool in finance coaching and financial education.

In simple terms, a model:

• Presents a financial calculation (or calculations)
• In a way that enables the user to understand it and to challenge it, especially about its assumptions.

See also

• Ceteris paribus
• Deterministic
• Financial modelling
• Model
• Risk management
• Rounding
• Simulation
• Stochastic