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 web

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/ Swedish 3 and English A/English 6 (for courses given in Swedish). 
  For courses given in English requires English B/ English 6 or equivalent.

Prerequisites

Basic knowledge of probability theory is recommended.

Literature

Kurslitteraturen är till största delen elektronisk och gratis för den som går kursen, (kurskompendiet finns dessutom i pdf-format för nedladdning av vem som helst). Studenten skriver själv ut de sidor han/hon vill titta på i pappersformat. Kurslitteraturen består av genomgångar, exempel och lösta övningsuppgifter. I kursen ingår också självrättande prov och system för inlämningsuppgift (vilket tillsammans utgör examinationen på kursen). Lang, H.: Lecture Notes on Financial Mathematics (pdf-fil; fri nedladdning via kursens informationssida) Hull. John C.: Options, Futures and Other Derivatives 3:e, 4:e eller 5:e upplagan (Prentice-Hall) rekommenderas som referenslitteratur.

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

Version

Course plan valid from: Autumn 13.
Examination information valid from: Autumn 07.