Financial Mathematics for Actuarial Science 2
|Unit level:||Level 2|
|Teaching period(s):||Semester 1|
|Offered by||School of Mathematics|
|Available as a free choice unit?:||N
Additional RequirementsMATH20951 pre-requisites
For students on the Actuarial Science and Mathematics programme only.
The unit aims to provide further instruction in simple financial transactions as used in actuarial science and the mathematics involved.
The unit covers methods of describing and assessing simple investments under a range of assumptions.
On successful completion of this module students will be able to
- Retain knowledge and demonstrate understanding of the topics in this course unit. In particular : appreciate a range of investments and projects and assess their value under simple assumptions; understand how the no arbitrage assumption can be used;appreciate the effects of term structure and stochasticity for interest rate calculations.
- Carry out routine calculations on project and investment assessment, no arbitrage, immunization and and term effects.
- Have the basic knowledge and a set of tools and methods that can be used; in subsequent course units; (together with MATH10951) to gain exemption from the Actuarial Profession CT1 examination; in a career involving mathematical and/or actuarial topics.
- Other - 20%
- Written exam - 80%
Assessment Further Information
- Coursework; two in-class tests, weighting within unit 10% each.
- Examination at end of semester 1, 2 hours, 80%.
This unit explores some further simple financial topics from a mathematical point of view.
- The role of finance within actuarial science,
- Appraisal and Comparison of Projects,
- Description of Investments,
- Compound Interest Problems : Fixed and uncertain income, Real Rates of interest, index linked bonds, Capital Gains Tax,
- Arbitrage. The No-Arbitrage Assumption. Forward Contracts,
- Term Structure of Interest Rates. Discrete and continuous time rates. Duratio, Convexity and Immunisation.
- Stochastic Interest Rate Models.
- Core Reading : Subject CT1, Financial Mathematics. Produced by the Actuarial Profession
- JJ McCutcheon and WF Scott, An Introduction to the Mathematics of Finance. Heinemann, 1986
Feedback tutorials will provide an opportunity for students' work to be discussed and provide feedback on their understanding. Coursework or in-class tests (where applicable) also provide an opportunity for students to receive feedback. Students can also get feedback on their understanding directly from the lecturer, for example during the lecturer's office hour.
- Lectures - 22 hours
- Tutorials - 11 hours
- Independent study hours - 67 hours