Undergraduate Course: Financial Mathematics (MATH10003)

Course Outline
School	School of Mathematics	College	College of Science and Engineering
Credit level (Normal year taken)	SCQF Level 10 (Year 3 Undergraduate)	Availability	Available to all students
SCQF Credits	10	ECTS Credits	5
Summary	"Optional course for Honours Degrees involving Mathematics and/or Statistics; stipulated course for Honours in Economics and Statistics. This course is a basic introduction to finance. It starts by making an introduction to the value of money, interest rates and financial contracts, in particular, what are fair prices for contracts and why no-one uses fair prices in real life. Then, there is a review of probability theory followed by an introduction to financial markets in discrete time. In discrete time, one will see how the ideas of fair pricing apply to price contracts commonly found in stock exchanges. The next block focuses on continuous time finance and contains an introduction to the basic ideas of Stochastic calculus. The last chapter is an overview of Actuarial Finance. This course is a great introduction to finance theory and its purpose is to give students a broad perspective on the topic."
Course description	Syllabus summary: (A) Introduction to financial markets and financial contracts; value of money; basic investment strategies and fundamental concepts of no-arbitrage. (B) Basic revision of probability theory (random variables, expectation, variance, covariance, correlation; Binomial distribution, normal distribution; Central limit theorem and transformation of distributions). (C) The binomial tree market model; valuation of contracts (European and American); No-arbitrage pricing theory via risk neutral probabilities and via portfolio strategies. (D) Introduction to stochastic analysis: Brownian motion, Ito integral, Ito Formula, stochastic differential equations; Black-Scholes model and Option pricing within Black-Scholes model. Black-Scholes PDE (E) Time value of money, compound interest rates and present value of future payments. Interest income. The equation of value. Annuities. The general loan schedule. Net present values. Comparison of investment projects.

Entry Requirements (not applicable to Visiting Students)
Pre-requisites	Students MUST have passed: Several Variable Calculus and Differential Equations (MATH08063) AND Fundamentals of Pure Mathematics (MATH08064) AND ( Probability (MATH08066) OR Probability with Applications (MATH08067))	Co-requisites
Prohibited Combinations	Students MUST NOT also be taking Probability with Applications (MATH08067) OR Probability (MATH08066)	Other requirements	None

Information for Visiting Students
Pre-requisites	None
High Demand Course?	Yes

Course Delivery Information

Academic year 2015/16, Available to all students (SV1)		Quota: None
Course Start	Semester 1
Timetable	Timetable
Learning and Teaching activities (Further Info)	Total Hours: 100 ( Lecture Hours 22, Summative Assessment Hours 2, Programme Level Learning and Teaching Hours 2, Directed Learning and Independent Learning Hours 74 )
Assessment (Further Info)	Written Exam 95 %, Coursework 5 %, Practical Exam 0 %
Additional Information (Assessment)	Coursework 5%, Examination 95%
Feedback	Not entered
Exam Information
Exam Diet	Paper Name		Hours & Minutes
Main Exam Diet S1 (December)	MATH10003 Financial Mathematics		2:00

Academic year 2015/16, Part-year visiting students only (VV1)		Quota: None
Course Start	Semester 1
Timetable	Timetable
Learning and Teaching activities (Further Info)	Total Hours: 100 ( Lecture Hours 22, Summative Assessment Hours 2, Programme Level Learning and Teaching Hours 2, Directed Learning and Independent Learning Hours 74 )
Assessment (Further Info)	Written Exam 95 %, Coursework 5 %, Practical Exam 0 %
Additional Information (Assessment)	Coursework 5%, Examination 95%
Feedback	Not entered
Exam Information
Exam Diet	Paper Name		Hours & Minutes
Main Exam Diet S1 (December)	MATH10003 Financial Mathematics		2:00

Learning Outcomes
On completion of this course, the student will be able to: Knowledge of basic financial concepts and financial derivative instruments. Fundamental understanding of no-Arbitrage pricing concept. Ability to apply basic probability theory to option pricing in discrete time in the context of simple financial models. Fundamental knowledge of Stochastic analysis (Ito Formula and Ito Integration) and the Black-Scholes formula. Introduction to actuarial mathematics.