The aim of this module is to build on the Mathematical and Statistical concepts introduced in year one, providing students with a range of mathematical tools which will be required in the final year of the program.
*Curricular information is subject to change
Matrix Algebra
- Solutions of Equations
- Elimination Methods
- Cramer’s Rule.
- Application to National Income models and input-output analysis.
Calculus
- Derivatives of Exponential and Logarithm Functions.
- Partial derivatives, First and Second order.
- Implicit and Total Differentiation.
- Optimisation Rules.
- Homogenous Functions, Euler's Theorem.
- Proportionate Differential and Growth Accounting, Log-Linear Functions.
- Integration of Natural Exponential Function. Integration by substitution and parts. Approximation Rules.
- Present value of a Continuous Income Stream.
- Application to Probability Density Functions.
- First order Linear Differential Equations with applications in Financial Maths.
- Difference Equations: Solutions and Applications.
Derivatives Introduced
- Futures, Options, Types of Traders.
- Interest rates, conversion from discrete time to continuous time.
- Calculating forward rates and derivation of formula.
- Forward pricing, value of a Forward contract.
- Calculating zero interest rates from fixed-income instruments.
- Bond pricing, Bond yield, Bond duration.
- Using calculus to derive Duration and Convexity formulae
The module will be taught using a combination of lectures, tutorials and laboratory sessions. Emphasis will be placed on problem solving and business applications
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 70 |
| Other Assessment(s) | 30 |