Financial mathematics (2017/2018)

Course code
4S00393
Name of lecturer
Roberto Renò
Coordinator
Roberto Renò
Number of ECTS credits allocated
9
Academic sector
SECS-S/06 - MATHEMATICAL METHODS OF ECONOMICS, FINANCE AND ACTUARIAL SCIENCES
Language of instruction
Italian
Period
Primo Semestre Triennali dal Sep 18, 2017 al Jan 12, 2018.

Lesson timetable

Go to lesson schedule

Learning outcomes

The objectives of the course are the introduction of the pillars of financial contracts and the quantitative method for their management, to be developed to the foundations of fixed income and portfolio management. The course will introduce the basic jargon in finance, as well as the main concepts underlying asset valuation and assessment of risk. At the same time, the course will develop quantitative methods which will be useful for advanced courses in finance.

At the end of the course, the student is expected to be able to perform operations involving the financial instruments explained in class, and to understand the theoretical ideas illustrated in the course.

Basic knowledge of mathematics and statistics is strongly recommended.

Syllabus

1. Financial contracts under certainty

1.1. Basic concepts.
1.2. General theory of financial laws.
1.3. Interest rates and inflation.
1.4. Annuities, mortgages and other financial contracts.
1.5. Evaluation of financial cash flows.

2. Bond markets

2.1. Perfect Markets. Absence of Arbitrage.
2.2. The term structure of interest rates.
2.3. Fixed rate bonds. Spot and forward contracts.
2.4. Interest rate risk.
2.5. Floating rate bonds.

3. Stock markets

3.1. Risk and return.
3.2. Investment in two assets.
3.3. Portfolio allocation.
3.4. Stock valuation: Capital Allocation Line and Capital Market Line.

Suggested Book: (in italian)
G. Castellani, M. De Felice, F. Moriconi, Manuale di Finanza. I. Tassi d’interesse. Mutui e obbligazioni, Società editrice il Mulino, Bologna 2005.

Additional material will be available online.

The course is composed of 72 hours of traditional class teaching, plus 20 hours with a tutor for practice.

Reference books
Author Title Publisher Year ISBN Note
Castellani, De Felice, Moriconi Manuale di Finanza I. (Edizione 1) Il Mulino 2005 978-88-15-10702-2 Edizioni successive sono equivalenti.

Assessment methods and criteria

The purpose of the final exam is to evaluate the ability of the students to perform operations with the tools discussed in the course, and to evaluate their independent ability to critically explain the theoretical concepts of the course.

The exam consists in a written exam, plus a mandatory oral exam if the result of the written exam is between 15/30 and 19/30. If the result of the written exam is greater or equal than 20/30, the oral exam is optional for the student. If the result of the written exam is less than 15/30, the exam is failed.

An intermediate exam will be taken in the middle of the course and graded. The intermediate exam is consideres successful with a grade equal or greater than 15/30. In this case, the student is entitled to pass only the second part of the exam in the first two sessions after the end of the course. It is not possible to take the second part in a different session. If the global result is not sufficient, it is not possible to re-take the second part. It is possible to ask, optionally, for an additional oral exam, with all total grades greater or equal than 15/30 (of course, this is the only chance to pass the exam if the grade in the two written exams is lower than 18/30). In the case in which the student does not want to use the intermediate exam after this is graded, he should communicate this to the Professor.

During the exam the student can use a special sheet with formulas prepared on purpose, and a calculator. It is strictly forbidden to use any other material, including computing tools such as smartphones, tablets and laptops.

STUDENT MODULE EVALUATION - 2017/2018