Reflections on My 2015 ModelOff “Season” (Pt 1)

by Stevenson Yu

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Stevenson YuLast year, after I did fairly poorly in Round 2 of what I considered were subjects I should be good at (Finance and Accounting), I resolved to practice hard for ModelOff 2015. Alas, it turned out to be yet another New Year’s resolution, pretty much in the vein of resolving to go to the gym and losing weight!

Commitments and the hustle of life pretty means that practice is out of the question. Not that I was completely out of practice. Part of the job is to create fiendishly challenging exams for my Management Science and Finance graduate students, and you bet I got some mileage out of some past ModelOff questions. Heh heh. Please don’t tell my students I adapted your questions.

Was this year’s ModelOff harder than last year? I’m not so sure about that. Round 1 was undoubtedly hard for me, to the point where I thought I wouldn’t have any chance of qualifying for Round 2. From the get-go, the multiple choice questions were harder than I remembered.

However, I found “Bread and Butter” uncharacteristically easy. It helped tremendously that I had recently discussed pro-forma basic financial statement modeling (thank you, Prof. Benninga, God rest your soul). In any case, this certainly was a bread-and-butter test of financial forecasting ability!

When I finished the first 2 parts within the recommended 60 minutes, I was quite pleased. For the first time ever, I was on time! That happiness completely vanished about 5 minutes into the second case, “Tax”. While I had expected something on deferred taxes and read up on the accounting treatment after receiving the case study information pack a few days before the competition, I wasn’t prepared for the main challenge of the case.

The modeler had to use MIN and MAX functions to return the appropriate number of days within the applicable period to compute for tax. Looking back, the rest of the model is easy once you get past this hump; unfortunately for me, I blanked out after VLOOKUP didn’t quite work, and skipped the case for the fourth one.

When I had read “Options to Call”, I was expecting the use of derivatives, and prepared beforehand my templates on the Black-Scholes Option Pricing model, as well as my spreadsheets on binary option valuation. Alas, it was a clever play on words, and was actually a comparison of various mobile phone contracts. After a few wasted minutes lollygagging at how to model the unlimited text messages and data, I settled on artificially putting in a ludicrously high number to serve as the allocation. When I re-attempted the problem after time expired, it was far easier to levy a charge of $0 instead.

By the time I muddled through Case 3, there were only 10 minutes left. This was not enough time to model much of anything in Case 2, and so I simply guessed on all of the questions, and finished the exam without submitting any spreadsheet for “Tax”.

In my estimation, that was by far my worst showing in ModelOff Round 1 – I thought I might have gotten maybe 60% of Part 1, and maybe 80% of Part 2. Guessing randomly with 6 multiple choice options is a losing proposition, so I guessed I got 0% of Part 3. I wasn’t sure how well I did on Part 4, but thought maybe half of the answers were correct.

While I have always joked about getting my butt kicked in Excel by ModelOff, it is still a big psychological hit to do poorly on an exam, especially when I read that there was this chap who got a cool 100% perfect score (I for one welcome my new Excel overlord, Mr. Alvin Woon). So, imagine my delight when I was told that not only had I qualified for Round 2, I had gotten eight points from wildly guessing – and apparently this was better than majority of the contestants!

Stay tuned for Stevenson’s reflections on Round 2

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