MATH345 Financial Mathematics
A course on the formulation, analysis, and interpretation of advanced mathematical models in finance and interest theory. Technology will be used to give students a hands-on experience in developing and solving their own models. The course will cover the basic fundamentals needed for the second actuarial exam. Applications to ''real-world'' problems in interest theory, including the development of complex annuity models, will also be studied. Although primary focus will be on the application of financial models developed in Kellison, the mathematical derivation and analysis of the formulae will also be covered.Financial models studied will include: the accumulation function and the special cases of simple and compound interest; nominal and effective interest and discount rates, and the force of interest –both constant and varying; Valuation of discrete and continuous streams of payments, including the case in which the interest conversion period differs from the payment period; geometrically and arithmetically varying annuity models; application of interest theory to amortization of lump sums, depreciation, mortgages, and additional financial models; determination of yield rates on investments; application of interest theory to fixed income securities, cash flow and portfolio models and additional financial models. Derivation, analysis and applications of duration and convexity models for approximating changes in present value and for constructing investment portfolios for immunization and asset-liability management will also be studied.
Prerequisite
MATH253, MATH255