Financial Mathematics - Theory of Interest & Cashflow Models

This course requires no prior knowledge on financial concepts and we will go through the main financial instruments one at a time. We will also look at the Time Value of Money, the Theory of Interest Rates and the Discounted Cash Flow Model. This is an introductory course for people who want to pursue careers in Actuarial Science, CFA, FRM, etc.

A mathematical background will be advantageous. Section 1What is Finance and Why do we have finance. What are Interest and Inflation Rates.

Why are Financial Transactions complicated. Section 2Introduction to Financial InstrumentsZero Coupon BondFixed Interest SecurityIndex Linked SecurityEquityAnnuityInsurance ProductsSection 3Theory of Interest - BasicPower of Interest RatesDiscount RatesBasic Actuarial NotationSection 4Theory of Interest - AdvancedMoney Rates vs Real RatesNominal Rates vs Effective RatesForce of InterestForce of Interest as a Function of timeSection 5Actuarial NotationDiscounting FactorAnnuity CertainAnnuity in AdvanceDeferred AnnuityAnnuities payable pthlyAnnuities payable continuouslyPerpetuitiesIncreasing AnnuitiesSection 6Term Structure of interest ratesSpot RatesForward RatesTheories on Yield CurvesYield to MaturityPar YieldImmunisationSection 7Equation of ValueLinear InterpolationSection 8Loan SchedulesSection 9Project AppraisalSection 10Stochastic Interest Rate ModelsLognormal Interest Rate ModelsSingle Factor ModelsHo-LeeVasicekHull-whiteCox-Ingress-RossSection 11Exam Questions.