5118 - FINANCIAL MATHEMATICS

 Course Objectives:

This course is intended to equip the students with a class of mathematical instruments relevant in the field of finance. Specifically, in the course we develop mathematical models that can be usefully applied both in financial theory and in corporate finance. Furthermore, part of the course is devoted to the discussion of some more avanced quantitative and analytical tools.

Brief outline of the programm.

1. Financial Mathematics.

   Present and future values. Annuities. Capital budgeting from the viewpoint of financial mathematics.

   The terms structure of interest rates. Duration, convexity and immunization. Applications to the management of fixed income portfolios. 

2. Calculus in Several Variables.

   Principles of optimization without and with constraints. Implicit functions. Applications to the theory of optimal portfolio selection.

3. Financial Markets.

   The single-period state-preferences model. The basics of pricing and hedging derivative securities.

   The multi-period state-preference model: a primer.

    

Textbooks and other teaching material will be indicated at the beginning of the course.

The exam consists of a written midterm test and a final written text. The results of the the two tests will be aggregated to obtain the grade for the course. The students will be allowed to undergo a short oral interview to improve their written score. The increment from the oral interview, however, will be at most 20% of the aggregated score from the written tests.