F78AB - Actuarial and Financial Mathematics

Course leader(s):

Andrea Sneddon (Edinburgh, January)
To be announced (Dubai, January)
Karamjeet Singh K.Ranthir Singh (Malaysia, January)
Adrian Nathai (Malaysia, January)

Aims

To introduce the student to more advanced mathematical models of cashflows accumulated or discounted at interest, and to develop skill in applying these models to real financial contracts and transactions.

Syllabus

1. Simple and compound interest

2. Effective and nominal interest rates. Discount rates. Force of Interest.

3. Present value or accumulation of any set of discrete-time cashflows, at constant or varying rates of interest. (3.1 Annuities.)

4. Continuously-paid cashflows.

5. Loans and Loan Schedules.

6. Yields.

7. Fixed Interest Securities.

8. Real interest rates and index-linked securities.

9. Discounted Cashflows.

10. Measuring Fund Performance. (10.1 MWRR, LIRR, TWRR.)

11. Duration, convexity and immunisation.

12. Term structure of interest rates.

Learning outcomes

By the end of the course, students should be able to do the following:

Describe the relationship between the different rates of interest (effective, nominal, force, real, money) and discount.
Calculate present values, future values and annuities using appropriate interest rates including cases where the cashflows are not level and/or non-constant interest rates.
Apply the concepts of time value of money to solve practical problems.
Apply and analyse the duration, convexity and immunisation of cashflows.
Define the equation of value and apply it to solve a variety of practical problems.

Further details

Curriculum explorer: Click here

SCQF Level: 8

Credits: 15