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DEGREE REGULATIONS & PROGRAMMES OF STUDY 2011/2012
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DRPS : Course Catalogue : School of Mathematics : Mathematics

Postgraduate Course: Financial Mathematics and Investment (MATH11048)

Course Outline
SchoolSchool of Mathematics CollegeCollege of Science and Engineering
Course typeStandard AvailabilityAvailable to all students
Credit level (Normal year taken)SCQF Level 11 (Postgraduate) Credits10
Home subject areaMathematics Other subject areaOperational Research
Course website http://student.maths.ed.ac.uk Taught in Gaelic?No
Course descriptionThe need to produce models in Finance that are as close to reality as possible has required the use of advanced mathematics and stochastic analysis. This course explores the basic theory of Financial Mathematics and considers important applications in finance and investment. The following topics are covered.

Introduction to financial derivatives, futures and forwards, options, option strategies.

Revision of probability, expectation, variance, covariance
and correlation, binomial and normal distribution, central limit theorem.

Time value of money, compound interest and discounting, equation of value.

Duration, convexity and immunisation of a portfolio.

Compound interest functions including annuities certain.

General loan schedule, comparison of investment projects.

Binomial trees and basic option pricing techniques in discrete time, limit of the Cox-Ross-Rubinstein model.

Brief introduction to Brownian Motion and Ito's formula,
Black-Scholes option pricing formula and its properties.

Different types of security (equities, debentures, index-linked stocks), stocks issued by governments, public bodies and limited companies. The term to maturity, perpetuities, prices and yields allowing for the possibility of default. Taxation. Needs of different investors, particularly pension funds.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Co-requisites
Prohibited Combinations Other requirements None
Additional Costs None
Information for Visiting Students
Pre-requisitesNone
Displayed in Visiting Students Prospectus?Yes
Course Delivery Information
Delivery period: 2011/12 Block 2 (Sem 1), Not available to visiting students (SS1) WebCT enabled:  Yes Quota:  None
Location Activity Description Weeks Monday Tuesday Wednesday Thursday Friday
No Classes have been defined for this Course
First Class First class information not currently available
Additional information 1 hour(s) per week for 4 week(s).
Exam Information
Exam Diet Paper Name Hours:Minutes
Main Exam Diet S2 (April/May)2:00
Summary of Intended Learning Outcomes
1. Knowledge of basic financial concepts.
2. Ability to apply basic probability theory in financial models.
3. Understanding of issues in actuarial mathematics.
4. Understanding of basic financial derivative instruments.
5. Understanding of option pricing in discrete time.
6. Familiarity with the Black-Scholes formula.
7. Understanding of some practical aspects of equities and bonds.

Assessment Information
Examination.
Special Arrangements
None
Additional Information
Academic description Not entered
Syllabus Not entered
Transferable skills Not entered
Reading list Not entered
Study Abroad Not entered
Study Pattern Not entered
KeywordsFMI
Contacts
Course organiserDr Julian Hall
Tel: (0131 6)50 5075
Email: J.A.J.Hall@ed.ac.uk
Course secretaryMrs Frances Reid
Tel: (0131 6)50 4883
Email: f.c.reid@ed.ac.uk
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© Copyright 2011 The University of Edinburgh - 16 January 2012 6:25 am