00675 - Financial Mathematics

Learning outcomes

The aim of the course is to provide the fundamentals of Mathematical Finance. In particular, students will be able to understand and evaluate some financial contracts that are usually faced in business management. Some simple stategies for risk control and diversification will be presented.

Course contents

Basic principles of financial mathematics: simple/commercial convention versus compound/instantaneous ones. Annuities. Perpetuities. Debt amortization. Evaluation of a generic financial transaction: NPV, IRR.

Fixed income market: zero coupon bonds, fixed coupon bonds, duration, yield-to-maturity. The Italian governmental bonds. Term structure of interest rate.

Valuation of risky investments. Mean-variance. Risk and volatility. Financial derivatives: forward and future contracts, options.

Readings/Bibliography

F. Cacciafesta. Lezioni di matematica finanziaria classica e moderna. Ed Giappichelli Torino

Suggested:

L. Barzanti, A. Pezzi. Matematica finanziaria. Manuale operativo con applicazioni in Excel. Esculapio Ed.

Teaching methods

Lectures and exercises. Each topic is presented along with several examples and exercises. Some additional exercises will be discussed during the tutorial classes which are strongly recommended.

A Lab classes will be organized.

Assessment methods

Written exam  consisting of 4-5 short exercises. Please note that the relevant topics  will be always proposed in the written exam. 

Do not forget to bring a calculating machine.

Further information on the exam will be provided during the first lecture of each module.

Teaching tools

Slides. A list of exercises and some Excel speadsheets will be made available.

Office hours

See the website of Rossella Agliardi