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Module Specifications

Archived Version 2015 - 2016

Module Title Financial Mathematics
Module Code MS318
School School of Mathematical Sciences

Online Module Resources

Module Co-ordinatorProf John CarrollOffice NumberX139
NFQ level 8 Credit Rating 7.5
Pre-requisite None
Co-requisite None
Compatibles None
Incompatibles None

MS318 builds on the material of MS216 to provide students with a grounding in elements of financial mathematics and its related applications, particularly the calculation of present and accumulated values for various streams of cash flows. The course also provides an introduction to financial instruments, including derivatives, and the concept of `no arbitrage' as it relates to financial mathematics. The combined syllabi of MS216 and MS318 map fully onto the 14 objectives of CT1: Financial Mathematics.

Learning Outcomes

1. Demonstrate attainment of the learning outcomes of MS216: An Introduction to the Mathematics of Finance
2. Interpret and solve problems relating to real and money interest rates
3. Describe the investment and risk characteristics of certain types of asset available for investment purposes.
4. Describe and solve elementary compound interest problems.
5. Calculate the delivery price and the value of a forward contract using arbitrage free pricing methods.
6. Interpret and solve problems relating to the term structure of interest rates.
7. Interpret and solve problems relating to simple stochastic models for investment returns.

Workload Full-time hours per semester
Type Hours Description
Lecture36Presentation of course material
Tutorial11Working from supplied tutorial sheets
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

Review of MS216
A review of the syllabus topics of MS216: An Introduction to the Mathematics of Finance, but also with the additional topics of variable force of interest and weighted rates of return (under Project Appraisal). CT1: (i) to (ix)

Fixed interest borrowings by government and other bodies; shares and other equity-type finance; derivatives. CT1: (x)

Simple Compound Interest Problems
Fixed Interest Securities; Running yields and redemption yields; present value or yield from an ordinary share or property; real rate of interest; index-linked bonds; income tax, capital gains tax and investments. CT1: (iv) & (xi)

Arbitrage & Forward Contracts
Calculating the price with or without fixed income and dividend yield; value of a forward contract; hedging. CT1: (xii)

Term Structure of Interest Rates
Yield (par and to maturity); spot and forward rates; duration, volatility and convexity; immunization. CT1: (xiii)

Stochastic Interest Rate Models
Mean and variance of independent and identically distributed annual rates of return; log-normal distribution; probability calculations. CT1: (xiv)

Assessment Breakdown
Continuous Assessment25% Examination Weight75%
Course Work Breakdown
TypeDescription% of totalAssessment Date
Reassessment Requirement
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
Indicative Reading List

  • ActEd Study Materials: 0, Subject CT1 Course Notes, Actuarial Education Company,
  • JJ McCutcheon and W E Scott: 1999, An Introduction to the Mathematics of Finance, Butterworth-Heinemann, 0 7506 0092
Other Resources

16860, Webpage, John Carroll, 0, MS318 Tutorial Sheets & Exam Papers, www.dcu.ie/~carrollj/ms318.html,
Programme or List of Programmes
ACMBSc Actuarial Mathematics
BSSAStudy Abroad (DCU Business School)
BSSAOStudy Abroad (DCU Business School)
ECSAStudy Abroad (Engineering & Computing)
ECSAOStudy Abroad (Engineering & Computing)
FIMB.Sc. Financial Mathematics
HMSAStudy Abroad (Humanities & Soc Science)
HMSAOStudy Abroad (Humanities & Soc Science)
SHSAStudy Abroad (Science & Health)
SHSAOStudy Abroad (Science & Health)
SMPSCSingle Module Professional Science