30375 - MATHEMATICS - MODULE 2 (APPLIED)
Course taught in English
Go to class group/s: 31
Synchronous Blended: Lezioni erogate in modalità sincrona in aula (max 1 ora per credito online sincrona)
Investing and financing are key areas in financial management. Investing requires ability to make efficient and profitable investment strategies deciding which asset a company should acquire at the best market and economic conditions. Defining a financing strategy is essential to the continuity of a business over the long term. The objective of this course is to provide a background in financial mathematics. It covers a diverse range of topics, from the basic concept of final value and present value to market interest rates and asset evaluations preparing students for positions in management, financial organizations or advanced work in financial markets. Being a branch of applied mathematics, financial mathematics analyses a given problem through mathematical models. The ability to think analytically is a success factor for students in their career.
- Accumulation and discount; present value and final value of a cash flow.
- Loan repayment, the cost of financing.
- Fixed income bond valuation, the rate of return of an investment.
- The term structure of interest rates.
- Cash flow duration and immunization.
- Project evaluation using Net Present Value and some extensions.
- Introduction to the one-period binomial model for European option valuation.
- Identify mathematical and financial tools for solving corporate problems.
- Explain the principles of loan repayment.
- Describe the main characteristics of fixed income bonds.
- Discuss the profitability of a financial project.
- Use the basic mathematical and financial tools to assess corporate activities (accumulation, discount).
- Analyse the rate of return of an investment and the cost of financing.
- Face-to-face lectures
- Exercises (exercises, database, software etc.)
- Group assignments
Teaching and learning activities of this course include, in addition to face-to-face lectures, the solution of exercises and the assignment of a group work. Those exercises allow students to apply the concepts illustrated during the course and assess their understanding through two quizzes and through four class discussion activities. Moreover stylized cases are proposed to students as group assignment and discussed in class with the purpose of interpreting real applications using the models explained during the course. Students are encouraged to attend the course on a regular basis.
With the purpose of measuring the acquisition of the above-mentioned learning outcomes, the primary method of assessment for this course is a combination of a written examination, group homework and individual quizzes. The final grade is equal to the weighted average 10% group work + 10% quiz + 80% final exam:
- Two quizzes (10% of the final grade, the lowest two quiz score is dropped) with closed-ended questions. These quizzes must be worked on independently with the support of notes or textbooks, and are aimed to test the ability to recognize basic knowledge and concepts regarding financial calculus. The score granted with quizzes is valid for the whole academic year.
- A group work (10% of the final grade), consisting in a stylized investment or financing problem. Each group should submit the results (implemented in Microsoft Excel) on paper for evaluation and prepare a short presentation to discuss the main outcomes in class. This assignment is aimed to test the ability to identify and examine investment and financing problems, the ability to work within a team and to summarize/communicate concisely the results of the work completed. The score granted with the group is valid for the whole academic year.
- Written modality - exam (80% of the final grade), consisting in a mixture of problems/questions, aimed to assess students’ ability to apply the analytical tools illustrated during the course. This exam must be worked on independently.
Furthermore, students have the possibility to discount a two-point question from the written examination if they attend three out of four class activities (Activities calendar will be provided in the course syllabus).
Students’ assessment are based on a written exam consisting of a mixture of problems/questions regarding the whole course syllabus. The final grade is equal to the mark granted in this final exam. This exam must be worked on independently.
Remark: students undertaking both quizzes and the group work can decide to take the exam as non-attending when registering for the exam.
- E. CASTAGNOLI, M. CIGOLA, L. PECCATI, Financial Calculus with Applications, Milano, EGEA, 2013.
- G. GURIOLI, Introduction to the Valuation of Investments, Milano, 2009 (PDF available on Bboard).
- S.A. BROWERMAN, Mathematics of Investment and Credit, ACTEX, Winsted CT, 2015, 6th Ed.(ISBN: 978-1-62542-485-3).