F78AA Actuarial and Financial Mathematics A

Prof Andrew CairnsDr Matthias FahrenwaldtDr Karamjeet Singh

Course co-ordinator(s): Prof Andrew Cairns (Edinburgh), Dr Matthias Fahrenwaldt (Edinburgh), Dr Karamjeet Singh (Malaysia).

Aims:

This course aims to provide students with an introduction to the basic concepts and models of financial mathematics.

Summary:

  • Simple interest
  • Compound interest and discount
  • Time units and effective rates of interest
  • Accumulations and present values of discrete-time cashflows
  • Varying rates of interest
  • Annuities
  • Yields
  • Measuring rates of return
  • Loan schedules
  • Fixed-interest securities
  • Discounted Cash Flows

Detailed Information

Pre-requisites: none.

Location: Edinburgh, Malaysia.

Semester: 1.

Learning Outcomes: Subject Mastery

At the end of studying this course, students should be able to:

  • Describe the basic concepts of simple and compound interest.
  • Calculate the present value or accumulation of any set of discrete-time cashflows, at constant or varying rates of interest
  • Derive and use simple formulae for values of level and increasing annuities-certain
  • Explain the concept of the yield on a series of cashflows, and its limitations
  • Calculate time-weighted, money-weighted and internal linked rates of return
  • Analyse loan schedules, including simple alterations
  • Describe basic fixed-interest securities, and calculate prices and yields allowing for tax
  • Understand, the discounted cash flow model and know what internal rates of return (IRR), net present values (NPV) and break-even durations are

Reading list:

  • Garrett, S.J. (2013). An Introduction to the Mathematics of Finance (second edition). Butterworth-Heinemann.
  • Zima, P. & Brown, R.L. (1996). Schaum’s Outline: Mathematics of Finance (Second Edition), McGraw Hill.

 

Assessment Methods:

There will be a two-hour end-of-course examination, contributing 90% of the total mark. During the second half of the semester there will be an Excel-based assignment counting for 10% of the total mark.

SCQF Level: 8.

Credits: 15.

Other Information

Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer

VISION: further information and course materials are available on VISION