The objectives of the course are to provide the students with a grounding in financial mathematics and its simple applications in banking, finance and insurance.

The course is intended to make the students an understanding of stochastic models as applied to financial markets and instruments.

describe how to use a generalized cash flow model to describe financial transactions

describe how to take into account the time value of money using the concepts of compound interest and discounting

calculate the present value and the accumulated value of a stream of payments using specified rates of interest

establish a relation between nominal and effective rates of interest

show how discounted cash flow techniques can be used in investment project appraisal

apply simple stochastic models for investment returns

have adequate knowledge in mathematics relating to finance as applied to business operations of financial entities and will also be able to appear in professional actuarial examination in financial mathematics

Present value and accumulated of a payment, Annuity certain, Immediate annuity and annuity due, Present value and accumulated value of Immediate annuity and annuity due, Relationship between the rate of interest payable per effective time period and the rate of interest payable p times per time period and the force of interest, Relationship between the rates of interest and discount over one effective time period, present value and accumulated value of a series of equal or unequal payments made at regular intervals under the operation of specified rates of interest, Equation of value, Net present value, Internal rate of return, payback period, money weighted rate of return, Time weighted rate of return, Simple stochastic models for investment returns.

1)

Kellison Stephen G. (1991). Theory of Interest, Richard D. Irwin, Inc. [Fisher, Vaarler]

2)

Scott, Willium F. McCutcheon J. (1986). An Introduction to the Mathematics of Finance. [Ross, Elliott, Capiniski]

3)

Sohrab Uddin, Mohammad (1992). An Introduction to Actuarial and Financial Mathematics

4)

Actuarial Education Company, CT1 Financial Mathematics Core Technical. [Weishaus]

5)

Donald, D.W.A. (1963). Compound Interest and Annuities Certain, Cambridge University Press, London