Registry
Module Specifications
Archived Version 2015 - 2016
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Description 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. | |||||||||||||||||||||||||||||||||||||||||
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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. | |||||||||||||||||||||||||||||||||||||||||
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 |
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Indicative Content and
Learning Activities Review of MS216A 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)InvestmentsFixed interest borrowings by government and other bodies; shares and other equity-type finance; derivatives. CT1: (x)Simple Compound Interest ProblemsFixed 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 ContractsCalculating the price with or without fixed income and dividend yield; value of a forward contract; hedging. CT1: (xii)Term Structure of Interest RatesYield (par and to maturity); spot and forward rates; duration, volatility and convexity; immunization. CT1: (xiii)Stochastic Interest Rate ModelsMean and variance of independent and identically distributed annual rates of return; log-normal distribution; probability calculations. CT1: (xiv) | |||||||||||||||||||||||||||||||||||||||||
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Indicative Reading List
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Other Resources 16860, Webpage, John Carroll, 0, MS318 Tutorial Sheets & Exam Papers, www.dcu.ie/~carrollj/ms318.html, | |||||||||||||||||||||||||||||||||||||||||
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