Mathematics

Financial Mathematics (L.6)

Module code: G5124
Level 6
15 credits in autumn semester
Teaching method: Lecture
Assessment modes: Unseen examination, Coursework

You will study specialised mathematical methods needed to solve financial problems. The module will equip you with skills to understand the calculation of monetary values under fluctuating interest and inflation, and to be capable of calculating investment returns using money value models.

You will study interest rate theory and construct the mathematical framework to describe:

  • generalised cash flows
  • time value of money
  • real and money interest rates
  • compound interest functions
  • equations of value and loan repayment schemes.

Following this, you will learn how to use these mathematical tools and methods in topics such as investment project evaluation and comparison, finally considering more complicated applications of interest rate theory such as the valuation of securities.

Questions may include:

  •  What is an appropriate money value model in order to calculate my investment return? Can we decide which model is better for us and use that?
  • How much overall interest will you pay for your mortgage plan? Which mortgage plan is better for you?
  • How do banks calculate your monthly payments for a loan?

Module learning outcomes

  • Systematic understanding of the valuation of cash flows under interest and inflation.
  • Ability to evaluate, analyse and disseminate a real world investment project by writing an easy to understand financial report.
  • Ability to describe how a loan is repaid by regular instalments.