SF271V Web Based Course in Financial Mathematics 7.5 credits

Educational level	Second cycle	Academic level (A-D)	C
Subject area	Mathematics	Grade scale	P, F

• Course information

• Course page on KTH Social

Learning outcomes

To give the participants a basic knowledge of expressions and mathematical models within the field of Financial Mathematics and to give them the ability to modify and analyze such models. The participants should also know the most common types of financial contract: terms (forwards and futures), options, bonds and swaps. This means that the student after taking the course should be able to:

• Calculate the price of some financial contracts such as currency terms, other term contracts and options with different underlying (e.g. shares, bonds, currencies, futures and raw materials)
• Calculate the duration for rent portfolios
• Decide on optimal hedge positions

The student should also have such an understanding and familiarity with the mathematical model that he/she (to some extent) can adapt existing models to new situations and carry out a mathematical analysis.

Course main content

• The correlation between now prices, forward prices, future prices and rate of interest.
• Rent theory; bonds, yield and duration, term structure; (long and short rates), rent swapping and FRAs (Forward Rate Agreements), term rates,
• Arbitrage-pricing; risk-neutral pricing, market price for risk, martingal pricing,
• Financial derivatives; terms (forwards and futures) and options with different underlying (shares, bonds, currencies, “futures” and raw materials), bonds, optimal hedging.

Disposition

Web based course in financial mathematics (mathematical modeling of financial contracts) on a basic level. The course is foremost directed to those wishing to get a general education of financial mathematics, e.g. professionals working with banking and finance but also for those who have a degree in financial economics and wish to broaden their understanding of the mathematical modeling and analysis of these models.

Eligibility

• 60 credits that consist of 7,5 academic credits in Mathematics and
• 6 credits in Mathematical Statistics or 7,5 credits in Statistics and
• documented proficiency in Swedish B and English A (for courses given in Swedish).

  For courses given in English requires English B or equivalent.

Prerequisites

Basic knowledge of probability theory is recommended.

Literature

The literature is mostly electronic and free of charge for those following the course. The student can print out those pages he/she wishes to view in paper form. The course literature consists of reviews, examples and solved assignments.  The course also includes self correcting exams and systems for hand in assignments (which together make up the examination of the course). Lang, H.: Lecture Notes on Financial Mathematics (pdf-file updated 7/1-2006) Hull. John C.: Options, Futures and Other Derivatives 3rd, 4th or 5th edition (Prentice-Hall) is recommended as reference literature

Required equipment

Computer with Internet connection, web reader handling Flash and Java applets. There is no need of specific installment of a specific programme.

Examination

• TEN1 - Examination, 1.5 credits, grade scale: P, F
• TEN2 - Examination, 1.5 credits, grade scale: P, F
• TEN3 - Examination, 1.5 credits, grade scale: P, F
• TEN4 - Examination, 1.5 credits, grade scale: P, F
• TEN5 - Examination, 1.5 credits, grade scale: P, F

Examination: Examination is carried out on Internet. For further information, please contact the teacher/contact person concerned.

The course ends with an oral or written exam.

Requirements for final grade

Passed examinations.

Offered by

SCI/Mathematics

Contact

info@rcn.kth.se

Examiner

Harald Lang <lang@kth.se>

Version

Course plan valid from: Spring 11.
Examination information valid from: Autumn 07.