Postgraduate Course: Financial Mathematics and Investment (MATH11048)
|School||School of Mathematics
||College||College of Science and Engineering
|Credit level (Normal year taken)||SCQF Level 11 (Postgraduate)
||Availability||Not available to visiting students
|Summary||This course is available only to students on the 'Financial Operational Research' Degree Programme.
The 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)
||Other requirements|| None
Course Delivery Information
|Academic year 2015/16, Not available to visiting students (SS1)
|Learning and Teaching activities (Further Info)
Lecture Hours 27,
Summative Assessment Hours 2,
Programme Level Learning and Teaching Hours 2,
Directed Learning and Independent Learning Hours
|Assessment (Further Info)
|Additional Information (Assessment)
||See 'Breakdown of Assessment Methods' and 'Additional Notes' above.
||Hours & Minutes
|Main Exam Diet S1 (December)||MATH11048 Financial Mathematics and Investment||2:00|
| 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.
|Graduate Attributes and Skills
||MSc Financial Operational Research students only.
|Course organiser||Dr Goncalo Dos Reis
Tel: (0131 6)51 7677
|Course secretary||Mrs Frances Reid
Tel: (0131 6)50 4883
© Copyright 2015 The University of Edinburgh - 18 January 2016 4:25 am