MATH20951 - 2010/2011
- Title: Financial Mathematics for Actuarial Science 2
- Unit code: MATH20951
- Credit rating: 10
- Level: 2
- Pre-requisite units: MATH10951
- Co-requisite units: None
- This course unit may only be taken by students on the Actuarial Science and Mathematics degree programme
- School responsible: Mathematics
- Members of staff responsible: Prof. P. Glendinning
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.
Intended learning outcomes
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.
Future topics requiring this course unit
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,
Learning and teaching processes
Two lectures per week in weeks 1-11 of semester 2. (22 lecture hours)
Small group tutorial in weeks 2-12. (11 tutorial hours)
Private Study (67 hours)
Coursework Assignment 1, 10%
Coursework Assignment 2, 10%
Examination at end of semester 2, 2 hours, 80%.