The module introduces the learner to the mathematics of Finance, including interest rates and future and present values. The methods of financial markets are examined, especially in the context of financial derivatives. Different methods for valuing these derivatives are considered.
Risk management
Hedging, arbitrage.
The time value of money
Simple and compound interest, present and future values, discount factors, net present value, rate of return, annuities.
Financial Markets
Introduction to financial markets: derivatives, forwards and futures, options, swaps.
Pricing techniques
Replication, the Law of One Price, the Arbitrage Theorem.
Discrete/continuous pricing models
The Binomial Model, introduction to Brownian motion and Black-Scholes.
Software Packages
Use of mathematical packages to model financial instruments.
Lectures supported by problem-solving sessions and the use of mathematical software packages.
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 70 |
| Other Assessment(s) | 30 |