- Docente: Roberto Dieci
- Credits: 8
- SSD: SECS-S/06
- Language: Italian
- Teaching Mode: Traditional lectures
- Campus: Rimini
- Corso: First cycle degree programme (L) in Business Economics (cod. 8848)
Course contents
Time value of money. Compounding and discounting: future value and present value, interest and discount factor. Simple interest. Compound interest and compound discount. Equivalent rates. Nominal and effective annual interest rates. Continuous compounding and discounting.
Annuities and loan repayment. Ordinary annuity and annuity due. The present value and the future value of an annuity. Perpetuities. Discounting of continuous cash flows. Amortization with constant instalments and with constant principal payments. Outstanding principal. Amortization plan. Adjustable-rate loans.
Financial project evaluation (under certainty). Methods for investment evaluation and choice. Discounted Cash Flow (DCF) and Internal Rate of Return (IRR): definition, properties and financial meaning. Annual Percentage Rate.
Bond valuation and yield curve. Term structure of interest rates. Spot rates and forward rates. Yield to maturity. Duration.
Basics of valuation of risky investments and Portfolio Theory. Choice under uncertainty, expected value, expected utility, stochastic dominance. Mean-variance criterion. Risk and volatility. Value at Risk. Portfolio Selection: Markowitz Model. Single-index models. Capital Asset Pricing Model (CAPM).
Readings/Bibliography
S.A. Broverman, Mathematics of Investment and Credit (5th edition ), Actex Publications, 2010.
S.A. Broverman, Mathematics of Investment and Credit, Solutions Manual (5th edition ), Actex Publications, 2010.
Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, William N. Goetzmann, Modern portfolio theory and investment analysis, 9th edition, John Wiley, 2014;
D.G. Luenberger, Investment Science, Oxford University Press, 1998.
Teaching methods
Classroom lessons
The exercises and problems presented and discussed in the classroom are essential to properly understand all the parts of the program. The (written) examination will mainly focus on the solution of specific problems, by means of the tools and techniques learnt in the classroom.
Assessment methods
Written exam.
The written exam consists of a number of exercises and problems of different levels of difficulty. In order to pass the exam successfully, students need to properly frame the assigned problems, and to correctly and effectively apply the basic and advanced techniques of financial calculus learnt in the course. Specific questions on the theoretical aspects of the models and methods presented in the course may also be part of the written exam.
Office hours
See the website of Roberto Dieci