Course Syllabus
This syllabus outlines the modules of MSMAT-GE-106 Mathematical Finance.
- Simple and compound interest
- effective and nominal rates
- force of interest
- present value and accumulated value
- equations of value
- annuities immediate and due
- perpetuities
- amortization schedules; sinking funds
- Bond valuation; price-yield relationship
- duration and convexity
- term structure of interest rates
- immunization: elementary idea
- fixed income securities
- risk associated with bonds
- Return and risk; expected return
- variance and covariance
- diversification
- two-asset and multi-asset portfolios
- Markowitz mean-variance model
- efficient frontier: introductory treatment
- capital asset pricing model: elementary discussion
- Forwards and futures
- options; European call and put options
- payoff diagrams
- put-call parity
- binomial option pricing model
- risk-neutral valuation: elementary introduction
- hedging: basic idea
- Random variables in finance
- expected value and variance
- random walk models
- Brownian motion: introductory idea
- Black-Scholes model: assumptions and statement
- limitations of models
- computational implementation of basic financial models