Module overview
Linked modules
Pre-requisites: (MATH1024 and MATH1059 and MATH1060) or ECON1011
Aims and Objectives
Learning Outcomes
Learning Outcomes
Having successfully completed this module you will be able to:
- Take into account the time value of money by using the concepts of compound interest and discounting.
- Use a generalised cash-flow model to describe financial transactions.
- Calculate the forward price and value of a forward contract using no-arbitrage pricing.
- Analyse straightforward compound interest problems, and solve resulting equations of value, including for the implied rate of return.
- Calculate the discounted mean term or volatility of an asset or liability and analyse whether an asset-liability position is matched or immunized.
- Describe the main investment and risk characteristics of the standard asset classes available for investment purposes.
- Apply discounted cash flow techniques to investment project appraisal.
- Demonstrate an understanding of the term structure of interest rates.
- Demonstrate an understanding of the nature and use of simple stochastic interest rate models.
- Describe how a loan may be repaid by regular instalments of interest and capital.
- Apply discounted cash flow techniques to the valuation of securities, including the effects of taxation.
- Demonstrate how interest rates and discount rates change when the underlying time period is altered.
- Calculate the present value and accumulated value of a cash flow of equal or unequal payments, at a specified rate of interest, and at a real rate of interest, assuming a given rate of inflation.
- Demonstrate an understanding of behavioural economics.
- Define and use standard compound interest functions.
Syllabus
Learning and Teaching
Teaching and learning methods
Type | Hours |
---|---|
Independent Study | 96 |
Teaching | 54 |
Total study time | 150 |
Resources & Reading list
General Resources
Kellison, Butcher and Nesbitt, and Broverman all cover similar ground..
McCutcheon and Scott covers most of the syllabus, is a good second choice, and, like Garrett, has a large number of good problems..
Hull covers the part of the syllabus relating to derivative securities, though this is also covered by Garrett..
Garrett is an essential text and covers all of the syllabus. Students should obtain a copy. Problems will be assigned from this text..
Textbooks
GARRETT, S.J. (2013). An Introduction to the Mathematics of Finance: A Deterministic Approach. Butterworth-Heinemann.
McCUTCHEON, J.J. and SCOTT, W.F., (1986). An Introduction to the Mathematics of Finance. Heinemann.
BUTCHER, M.V. and NESBITT, C.J. (1971). Mathematics of Compound Interest. Ulrich’s Books.
HULL, J.C., (2014). Options, Futures, and Other Derivatives. Prentice Hall.
BROVERMAN, S.A. (2010). Mathematics of Investment and Credit. Actex Publications.
KELLISON, S.G (2008). Theory of Interest. Irwin.
Assessment
Summative
This is how we’ll formally assess what you have learned in this module.
Method | Percentage contribution |
---|---|
Class Test | 10% |
Exam | 70% |
Assignment | 20% |
Referral
This is how we’ll assess you if you don’t meet the criteria to pass this module.
Method | Percentage contribution |
---|---|
Exam | 100% |
Repeat
An internal repeat is where you take all of your modules again, including any you passed. An external repeat is where you only re-take the modules you failed.
Method | Percentage contribution |
---|---|
Exam | 100% |
Repeat Information
Repeat type: Internal & External