Scientific Disciplinary Sector (SSD)
SECS-S/06 - MATHEMATICAL METHODS OF ECONOMICS, FINANCE AND ACTUARIAL SCIENCES
primo semestre (lauree magistrali) dal Oct 4, 2021 al Dec 17, 2021.
The course aims at providing the student with tools for the financial portfolio managing of companies operating in international markets. In particular the course will focus on: some basic concepts of the financial markets and specific features characterizing the international markets; some mathematical tools for capturing crucial relations among different financial instruments, with applications to risk hedging and to investments planning; some software tools for supporting the decision process. At the end of the course, the student should have to be aware of concepts which are fundamental for companies investing or seeking funding on international markets. For example she should have understood: the relationships between interest rates and exchange rates; the functioning of some derivatives on such rates; the types of risk inherent in domestic and foreign bonds and in the evaluation and management of an international company. Furthermore, the student should have to be able to apply principles and criteria, and to use mathematical and software tools for the assessment and the choice of financial opportunities.
1. Interest rates:
term structures of spot interest rates [Notes, Luendberger]
no arbitrage valuation [Notes]
forward rates [Notes]
interest rate swaps [Notes; Hull: 6.1, 6.3, 6.4]
2. Currency risk:
value of a MNC [Madura]
exchange rates determinants [Madura, ch. 4].
Currency derivatives [Madura, ch. 5, Notes]:
forwards contracts and interest rate parity [Madura, ch. 5, Notes]
stock options and currency options [Madura]
currency swaps [Hull: 6.5, 6.6].
Exchange rates forecasting [Madura, ch. 9]
Hedging currency risk examples [Madura ch 11]
USEFUL MATERIAL on the moodle page of the course: notes of the lessons, exercises
1) A good knowledge of the basic tools of the mathematical analysis and analytic geometry (limits / continuity / derivatives / integrals / plots, straight lines, slope, intercept),
ability to solve simple equations / inequalities
2) A good knowledge of the basic tools in statistics (random variables, probability distributions, expectation / moments).
3) A good working knowledge of basic financial mathematics (interest rate of a simple financial operation, internal rate of return, basis of an interest rate, equivalent rate in another basis, simple/compounded capitalization regimes, zero coupon bonds, coupon bonds, shares of a firm)
PREPARATORY COURSES: Mathematics, Financial Mathematics
SKILLS NECESSARY for successful learning: willingness and ability to conduct logical reasoning in a rigorous way, and to motivate each step and the conclusions
ORGANIZATION OF TEACHING ACTIVITIES: lessons, exercises
Visualizza la bibliografia con Leganto, strumento che il Sistema Bibliotecario mette a disposizione per recuperare i testi in programma d'esame in modo semplice e innovativo.
The exam consists of a series of 3 quizzes assigned during the course (40% of the final grade) and a written test after the end of the course (60%). Also an oral examination could be compulsory, in case the teacher needs for specific insights. Requests for further questions to increase the score are not accepted.
The written test and the quizzes contain both practical exercises and theoretical questions. Each quiz will focus on a specific part of the program, while the written test covers the whole program of the course. During the carrying out of the quizzes and the written test it is not allowed to use notes or other didactic material.
The exam is passed if the final overall assessment is at least 18/30.
Characteristics of the expected performance. The student is required to demonstrate a critical and in-depth knowledge of the topics covered in the course. The concepts must not be exposed mechanically but in a reasoned way, the student is expected to be able to recognize when the use of a formula obtained for a basic case is not appropriate. Connections among different parts of the program may be required and advanced level exercises (marginally) can be proposed.
The concise but comprehensive exposure, the rigor, the direct pointing towards the core of the matter will be particularly appreciated. Vague, inaccurate, poorly justified or incorrect answers will be penalized
Students not attending the lectures: the examination methods are not differentiated between attending and non-attending students. Given the opportunity to follow the lessons even remotely, it is strongly recommended to view all the recordings that will be placed on the moodle page of the course
Further details about the exam will be provided on the course moodle page.