Module: Financial Mathematics

Module Specifications..

Current Academic Year 2023 - 2024

Please note that this information is subject to change.

Module Title	Financial Mathematics
Module Code	MS318
School	School of Mathematical Sciences
Module Co-ordinator	Semester 1: Mary Hall Semester 2: Mary Hall Autumn: Mary Hall
Module Teachers	Mary Hall
NFQ level	8	Credit Rating	7.5
Pre-requisite	None
Co-requisite	None
Compatibles	None
Incompatibles	None

None
Excel lab exam

Description

MS318 aims to provide students with a grounding in financial mathematics and its related applications, particularly the calculation of present and accumulated values for various streams of cash flows. The module covers simple investment and insurance contracts, interest rate theory including the term structure of interest rates and immunisation theory. The module develops best practice in data analysis and modelling for financial applications and will build on material in module MS119 in the development of financial models and solving equations of value using Excel.

Learning Outcomes

1. Describe the principles underlying financial and actuarial modelling techniques and incorporate best practice in the development of financial models.
2. Build cashflow models for simple investment and insurance contracts and develop and solve equations of value using these cashflow models.
3. Demonstrate an understanding of effective and nominal interest and discount rates and the relationship between them.
4. Describe and solve elementary compound interest problems and problems involving the term structure of interest rates.
5. Demonstrate an understanding of Redington’s theory of immunisation.
6. Apply discounted cashflow techniques for project appraisals.

*Type*	*Hours*	*Description*
Workload	Full-time hours per semester
Lecture	26	Presentation of course material
Tutorial	11	Working from supplied tutorial sheets
Laboratory	10	Practical Excel based labs
Total Workload: 47

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities

Actuarial and Financial Modelling
Data sources and exploratory data analysis; model choice; deterministic v stochastic models; assumption setting; sensitivity analysis; scenario-based and proxy models; model review and development; interpreting and communicating results.

Theory of Interest Rates
Interest and discount rates; effective and nominal rates; force of interest; present and accumulated values; compound interest functions; level and increasing annuities and accumulations; term structure of interest rates; immunisation.

Equations of Value for Financial Problems
Loan schedules; Bond prices and yields allowing for income and capital gains tax, optional redemption dates and inflation (real and nominal rates). Solving complex equations of value using Excel.

Project Appraisal
Discounted cashflow techniques; net present value calculations; use of internal rate of return and payback period in project appraisal. Excel models for project evaluation and comparisons.

Assessment Breakdown
Continuous Assessment	25%	Examination Weight	75%

Type	Description	% of total	Assessment Date
Course Work Breakdown
Practical/skills evaluation	End of semester Excel lab exam.	25%	Week 12

Reassessment Requirement Type
Resit arrangements are explained by the following categories; 1 = A resit is available for all components of the module 2 = No resit is available for 100% continuous assessment module 3 = No resit is available for the continuous assessment component
This module is category 1

Indicative Reading List

JJ McCutcheon and W E Scott: 1999, An Introduction to the Mathematics of Finance, Butterworth-Heinemann, 0 7506 0092

Other Resources

None

Programme or List of Programmes

ACM	BSc in Actuarial Mathematics
AFU	Age Friendly University Programme
BSSA	Study Abroad (DCU Business School)
BSSAO	Study Abroad (DCU Business School)
FIM	B.Sc. Financial Mathematics
HMSA	Study Abroad (Humanities & Soc Science)
HMSAO	Study Abroad (Humanities & Soc Science)
IESA	Study Abroad (Institute of Education)
IESAO	Study Abroad (Institute of Education)
SHSA	Study Abroad (Science & Health)
SHSAO	Study Abroad (Science & Health)

Date of Last Revision

15-FEB-11

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