ARE THERE DIFFERENT TYPES OF FINANCIAL MODELS USED ON WALL STREET?
There are many kinds of financial models used on Wall Street. While most financial models focus on valuation, some are meant to quantify and predict risk, portfolio performance, or general economic trends within and industry or region. There are several different methods employed for valuation in financial modeling. Discounted cash flow models (DCF models) and capital asset pricing models (CAPM) are used to assess the value of a security. However, while the discounted cash flow model is used by financial analysts to estimate the fair price of a security with respect to identifying undervalued securities, the capital asset pricing model focuses on valuation of a security within the context of its volatility, or risk.
