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This subject aims to provide students with basic training on modern financial mathematics methods, which covers an overview of data analysis, principles of actuarial modelling and financial transactions, the understanding of real and nominal interest rates, the time value of money methods, bond pricing methods, assets replication methods, the equation of value methods, and project appraisals methods. This subject focuses on applying the above methods to the mathematical modelling of financial markets.
Intended learning outcomes
On successful completion of this subject, students should be able to:
- Describe sources of data, the aims and conducting of data analysis, and the principles of actuarial modelling in the solution of a range of practical problems;
- Describe and apply the main methods of finding the accumulation or present value of a payment, or a series of payments under simple and compound interest and discount;
- Analyse and solve equations of value for the price or yield of a bond, the present value or yield of an ordinary share or property;
- Construct and analyse a loan schedule, including cases when terms of a loan are altered;
- Explain the key features of the main types of financial assets, including shares, bonds, property and derivatives
- Show how discounted cash-flow and equation of value techniques can be used in investment project appraisal;
- Demonstrate a knowledge and understanding of real and money interest rates, and the term structures.
- Demonstrate an understanding of duration, convexity and immunisation of cash-flows.
High level of development: written communication; problem solving; application of theory to practice; synthesis of data and other information; use of computer software.
Last updated: 16 November 2019