Mathematics in the World of Finance - MA6591

Location Term Level Credits (ECTS) Current Convenor 2019-20
Canterbury Autumn
View Timetable
6 15 (7.5)

Pre-requisites

MAST4010 (Real Analysis 1)

Restrictions

None

2019-20

Overview

This module provides an overview of analytical careers in finance and explores the mathematical techniques used by actuaries, accountants and financial analysts. Students will learn about different types of financials assets, such as shares, bonds and derivatives and how to work out how much they are worth. They will also look at different types of debt and learn how mortgages and other loans are calculated. Developing these themes, the module will explain how to use maths to make financial decisions, such as how much an investor should pay for a financial asset or how a company can decide which projects to invest in or how much money to borrow. Risk management is a vital part of most mathematical careers in finance so the module will also cover different mathematical techniques for measuring and mitigating financial risk. Extension topics may include complex derivatives, economic theories of finance and the dangers of misusing mathematics. The module provides an opportunity to apply complex mathematical techniques to important real-world questions and is excellent preparation for those considering a financial career.
Introduction to financial mathematics: Key uses of mathematics in finance; key practitioners of financial mathematics.
Financial valuation and cash flow analysis: Discounting, Interest rates and time requirements, Future and Present value. Project Evaluation.
Characteristics and valuation of different financial securities: Debt capital, bonds and stocks, valuation of bonds and stocks.
Loans and interest rates: term structure of interest rates, spot and forward rates, types of loan, APR, loan schedules.
Capital structure and the cost of capital: Gearing, WACC, understanding betas.
Additional topics that may be covered: arbitrage and forward contracts, efficient markets hypothesis, pricing and valuing forward contracts, option pricing and the Black Scholes model, credit derivatives and systemic risks, limitations of mathematical modelling.

Details

This module appears in:


Contact hours

42 hours

Method of assessment

80% examination, 20% coursework

Indicative reading

Herbert B. Mayo, Basic Finance: An Introduction to Financial Institutions, Investments and Management, 10th Edition, South-Western College Pub, 2011.
Garratt, S.J. An introduction to the mathematics of finance. A deterministic approach, 2nd Edition, Butterworth-Heinemann, 2013.

Learning outcomes

The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
1 demonstrate a systematic understanding of several important applications of mathematics in finance and an understanding of the work of the main practitioners of mathematical finance including actuaries, investment analysts and accountants;
2 demonstrate the capability to make sound judgements in accordance with the basic theories and concepts and demonstrate a reasonable level of skill in calculation and manipulation of the material in the following areas: time value of money, characteristics of different financial securities, valuation of securities, project evaluation and decisions, interest rates, loans, capital structure and the cost of capital;
3 apply key mathematical concepts and methods in well-defined contexts in finance, showing an ability to evaluate the appropriateness of different approaches to solving problems in this area.

The intended generic learning outcomes.
On successfully completing the module students will be able to:
1 manage their own learning and make use of appropriate resources;
2 understand logical arguments, identifying the assumptions made and the conclusions drawn;
3 communicate straightforward arguments and conclusions reasonably accurately and clearly;
4 manage their time and use their organisational skills to plan and implement efficient and effective modes of working;
5 solve problems relating to qualitative and quantitative information;
6 make competent use of information technology skills such as online resources (Moodle), internet communication;
7 communicate technical material competently;
8 demonstrate an increased level of skill in numeracy and computation;
9 demonstrate the acquisition of the study skills needed for continuing professional development.

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