Mathematical Finance (GRAE017) | ISM

Mathematical Finance (GRAE017)

Course description

This introductory course surveys various mathematical concepts utilised in financial economics. Together with Financial Econometrics, it constitutes the foundation of the ‘research’ pillar in MSc Financial Economics at ISM. As such, some of the topics will be ‘repeated’, but more in depth, in other courses. As clients’ profiles and objectives have become increasingly global and complex over the past few decades, financial institutions have come up with more sophisticated and more structured products, alternatives, and approaches, some of which are reviewed in this course from a pricing and mathematical perspective. Given the current political environments (e.g. Brexit, transpacific trade war), we pay significant attention to the assumptions behind formulae and models, while we practice not only calculations but also explanations to prepare ourselves for the contemporary regulatory environment, most notably characterised by the MiFID II.

Learning outcomes

Upon successful completion of this course, students will be able to:

  • Illustrate and utilise the axioms of rationality in pricing.
  • Define and explain interest rates as they are applied to different types of debt instruments.
  • Define and explain the structuring considerations for various derivative products.
  • Identify issues and projects surrounding the rapidly changing world such as hybrid securities, financial engineering, and blockchain.