FINANCIAL MATHEMATICS (SEM)
cod. 16785

Academic year 2021/22
2° year of course - First semester
Professor
- Annamaria OLIVIERI
Academic discipline
Metodi matematici dell'economia e delle scienze attuariali e finanziarie (SECS-S/06)
Field
A scelta dello studente
Type of training activity
Student's choice
48 hours
of face-to-face activities
6 credits
hub:
course unit
in ITALIAN

Learning objectives

Knowledge and understanding:
The student learns the main features of the basic quantitative models and methods for the valuation of:
- Financial securities and credit instruments;
- Future cash flows (originated by financial securities, economic investments, enterprises, and so on);
- Time-structure of returns and prices of fixed-income securities.
He/she will learn how to use such models and methods.
The course deals with deterministic models only. The student also examines simple models dealing with investments bearing financial risks, with particular regard to financial immunization in respect of interest rate risk.

Applying knowledge and understanding:
The student is trained in performing the basic quantitative assessments of financial securities and credit instruments, comparing market prices of fixed-income securities, setting a financial valuation problem or taking a decision based on financial criteria.

Making judgements:
The course aims at developing the financial sensitivity and the ability for critical analysis which are expected from a student graduated in the economic area, and who is employed in the financial sector, or deals with the financial management of commercial or industrial enterprises.

Communication skills:
The student is educated in the use of the basic financial-quantitative language. He/she is able to interpret (and, if necessary, validate by autonomously developing appropriate calculations) the output of basic financial packages, as well as to describe them to third parties (such as users of financial services). Moreover, he/she is able to understand and describe the basic quantitative financial valuation criteria, commonly used for financial decision-making.

Learning skills:
The student develops the ability to understand the financial problems and to select the most appropriate quantitative valuation models. The student learns how to adopt deterministic quantitative models, also in a stochastic framework. In this latter respect, he/she understands which simplifications must be assumed in order to obtain a quick solution and how to interpret the main findings in respect of such simplifications.

Prerequisites

Although not compulsory, a basic knowledge of the contents of Calculus is recommended.

Course unit content

Part 1: Future value, present value. The valuation of annuities. Mortgages.
Part 2: Net Present Value, Internal Rate of Return. Net Present Value and Economic Value Added.
Part 3: Price and yield to maturity of fixed-interest bonds. The term structure of interest rates (spot rates and forward rates). The non-arbitrage valuation principle. Mean duration. Interest rate risk. Financial immunization.

Full programme

Available online, on the Elly platform. During the teaching period, the detailed program will be updated weekly.

Bibliography

In Italian: Samuel A. Broverman (2019). Matematica finanziaria. Edizione italiana a cura di A. Olivieri e G. Favero. Egea, Milano
In English: Samuel A. Broverman (2017). Mathematics of Investment and Credit. ACTEX Learning.

Course slides, available online on the Elly platform, or in printed version at the Copy Center of the Department of Economics and Management.
Exercises, available online on the Elly platform.

Teaching methods

Face-to-face.
Face-to-face lectures will be recorded; the url will be provided on Elly. In order to stimulate active participation in class, for some lectures a pre-recording will be provided, to be listened before the face-to-face lecture. For detailed information, see Elly. If, because of technical issues, the recording of live lectures fails, a summary video will be provided.
The student has to further practice on models and numerical problems on his/her own. The student will be assigned problems which he/she has to solve autonomously after classes, so to develop his/her own ability to use the models presented during classes.
Moreover, mid-term tests will be assigned, which will add up to the final grade of the exam; details are available in the section about assessment methods.
Lecture videos will be available until the end of the winter exam session. Students not attending on site classes are warmly recommended to attend recorded classes sticking to the face-to-face lecture plan.

Assessment methods and criteria

Multiple choice test + short numerical exercises.

During the teaching period, 4 online mid-term tests and a final on site test will be organized. The final test will be scheduled on the first exam date of the winter session (December).

Due to space limitations in this Syllabus, it is not possible to provide here detailed information about ordinary exams and intermediate tests. Students are invited to refer to the detailed descriptions about the exam arrangement provided on the Elly page of the course.

Other information