Applied Financial Mathematics II

Synopsis

MTH360 Applied Financial Mathematics II is designed to build onto the knowledge that learners have from MTH359 Financial Mathematics I. Motivated by the desire to allocate resources efficiently over time, the course will then introduce Portfolio Theory, which is one of the most fundamental economic theories dealing with investments.

Level: 3
Credit Units: 5
Presentation Pattern: EVERY JAN

Topics

Pricing of Forward & future contracts
Comparison of forwards and futures
Basic theory of interest
Present and future values of streams
Fixed-income securities
Yield, duration and immunization
Portfolio return and risk
Efficient frontier
Two fund theorem and One fund theorem
Capital Asset Pricing Model (CAPM)
Security market line (SML)
CAPM Pricing Formula

Learning Outcome

Compare forward and future contracts.
Discuss the efficient frontier, and explain the implications for incremental returns as an investor assumes more risk.
Solve, using the SML, the expected return on a security.
Infer the present and future values for different cash flow streams.
Construct bond portfolio to immunize against interest changes.
Interpret the market portfolio, and the role of the market portfolio in the formation of the capital market line (CML).

Part-time Programmes / CET Courses

Singapore University of Social Sciences

Applied Financial Mathematics II

Applied Financial Mathematics II (MTH360)

Synopsis

Topics

Learning Outcome