You are here:

00675 - Financial Mathematics

Academic Year 2024/2025

                
                        Docente:
                        Paolo Foschi
                    
                        Credits:
                        8
                    
                        SSD:
                        SECS-S/06
                    
                        Language:
                        Italian
                    
                        Teaching Mode:
                        Traditional lectures
                        
                            Campus:
                            Rimini
                        
                            Corso:
                            First cycle degree programme (L) in
                            Statistics, Finance and Insurance (cod. 5901)

                            Teaching resources on Virtuale
                        
                                    Course Timetable
                                
from Sep 17, 2024 to Dec 10, 2024

Learning outcomes

At the end of this course, the student can manage the basics on financial capitalization and actualization regimes. More specifically, the student will be able to handle contracts involving money transactions and to manage different cash flow strategies.

Course contents

Theory of Interest. Simple, Compound and Continuous Interest Rates. Present and Future Values of cash flow streams.

Rendite e ammortamenti. Present and Future values of Annuities. Perpetuities (or consols). Continuous cash flows. Loan calculations,Running amortization, annual worth.

Yields. Coupon bond. Yield to maturity. Internal Rate of Return (Net and Gross). Duration and Modified Duration.

Bonds and Term structure of interest rates. Spot and forward rates. Term structure. Yield to maturity. Duration. Forward contracts. IRS and swap rates. Bootstrapping the forward curve.

Uncertainty, risk and choices. Uncertainty and risk. Preferences. The Von-Neuman and Morgenstein setup, Expected utility, Risk-aversion. Worst-case and Minimal Regret preferences. Risk premiums. Arrow-Pratt theorems. Classes of utitility functions: CARA, CRRA and polynomial. Mean variance criterion.Risk-selling, risk-pooling, risk-sharing and risk-spreading.

Portfolio Theory. Portfolio returns and risk. Volatility and other risk-easures. Mean-variance approach. The 2-asset portfolio. Markowitz mean-variance portfolio theory. The two-fund theorem. Markowitz model with a risk-free asset. Sharpe's index.

Readings/Bibliography

See the italian version of this page for textbooks in italian.

A suggested english textbook is the Luenberger:

- D. Luenberger. Investment Science. Oxford University Press, 1998.

Teaching methods

Blackboard lessons and exercises. Computer experiment sessions to show some model performances.

Assessment methods

Written test with exercises and theoretical questions.

Length of the test: 1h -1.5h

Requirements: a calculator. The test will be held in a pc-lab equipped with Excel and R (R-studio). The student can use these tools in alternative to the calculator.

Teaching tools

Lessons using Blackboard and slides. Exercises. Examples on Excel.

Office hours

See the website of Paolo Foschi