# Università degli Studi di Napoli "Parthenope"

## Teaching schedule

2018/2019
Belonging course:
Disciplinary sector:
MATHEMATICAL METHODS OF ECONOMY, FINANCE AND ACTUARIAL SCIENCES (SECS-S/06)
Language:
Italian
Credits:
9
Year of study:
2
Teachers:
Dott.ssa DONNINI Chiara
Cycle:
First Semester
Hours of front activity:
72

Italian

### Course description

The aim of the course is to provide students with a
base of knowledge of the formalization and pricing of financial contracts
and risk management; to introduce students to the valuation models of
price and risk of contracts and portfolios; to provide criteria for choosing
between different value-risk positions.
Knowledge and understanding: the student should know and understand
the main issues related to the evaluation of financial contracts, in
particular bonds and loans, the definition of contracts value in capital
market, the construction of the term structure of interest rates, the
applications of financial instruments in business valuation.
Applying knowledge and understanding: the student should be able to
apply the results of financial mathematics to the evaluation of contracts,
to design the mathematical algorithms implementing financial models, to
apply the acquired knowledge to evaluation schemes of banks,
insurances and industries.
Making judgments: the student should be able to use autonomously the
acquired knowledge to solve economic and financial problems.
Communication: the student is expected to give clear and in-depth
answers to the questions of the written exam and to the ones of the oral
exam. The student should be able to communicate using financial and
mathematical language and instruments.
Lifelong learning skills: the student should be able to show a good
learning ability, by widening, for example, his/her knowledge with use of
relevant bibliographic references. The student will have the opportunity
to apply the knowledge gained in previous courses integrating them with
the additional professional skills that characterize the course.

### Prerequisites

General knowledge of Calculus acquired in previous courses, in particular
functions, limits, continuity and differentiability of real-valued functions of
a single variable, derivatives, graphing, functions of several variables:
partial derivatives, linear algebra problems, solution of non-linear
equations, integrals: analytical and computational techniques.

### Syllabus

(The references in brackets concerning the book of G. Castellani, M. De
Felice, F. Moriconi)
Part I Money, time and risk
- Temporal structure of money exchange, capital and interest (chap. 1)
- Contracts, prices, trading (chap. 2)
- Financial risks(chap. 3, except par. 3.3 and 3.5)
Part II Valuation under certainty
- Compound interest and its generalization to the exponential growth
model (chap. 4, par. 4.1-4.3)
- Loans amortization (chap. 5, par. 5.1, 5.2.1, 5.5.1, 5.5.2)
- Internal rate of return (chap. 6, except par. 6.3 and 6.4)
- Rules of financial equivalence (chap. 7, par. 7.1, 7.2, 7.4.1, 7.5, 7.6
except 7.61. and 7.6.2)
Part III Market evaluation of contracts
- Value function and market price (chap. 8)
- Term structure of interest rates (chap. 9, except par. 9.5)
- Measures of timing and sensitivity (chap. 10, except par. 10.1.8 and
10.2.6)
- Valuation methods of the term structure of interest rates (chap. 11, par.
11.2.1, 11.2.2, 11.4)
- No-arbitrage valuation of index contracts (chap. 12, except par. 12.5)

Part I Money, time and risk (16 hours)
- Temporal structure of money exchange, capital and interest
- Financial risks
Part II Valuation under certainty (16 hours)
- Compound interest and its generalization to the exponential growth
model
- Loans amortization
- Internal rate of return
- Rules of financial equivalence
Part III Market evaluation of contracts (40 hours)
- Value function and market price
- Term structure of interest rates
- Valuation models of the term structure of interest rates
- Bootstrap method and Zero Coupon Swap (ZCS) structure
- Svensson model
- Term structures of European Central Bank (ECB)
- Measures of timing and sensitivity
- No-arbitrage valuation of index contracts
- Case study: disputes over derivative contracts
Full program
(The references in brackets concerning the book of G. Castellani, M. De
Felice, F. Moriconi)
Part I Money, time and risk
- Temporal structure of money exchange, capital and interest (chap. 1)
- Contracts, prices, trading (chap. 2)
- Financial risks(chap. 3, except par. 3.3 and 3.5)
Part II Valuation under certainty
alla costruzione delle strutture per scadenza, e un
colloquio orale volto alla verifica della acquisizione delle conoscenze e
delle capacità dello studente di applicare le conoscenze acquisite.
Il voto, in trentesimi, sarà il risultato delle due prove.
Programma esteso (I riferimenti in parentesi sono al testo di G. Castellani, M. De Felice, F.
Moriconi)
Parte I Importi, tempo e rischi
- Struttura temporale dello scambio di importi, il capitale e l'interesse
(cap. 1)
- I contratti, lo scambio, i prezzi (cap. 2)
- I rischi (cap. 3, esclusi i paragrafi 3.3 e 3.5)
- Parte II La valutazione in condizioni di certezza
- La legge esponenziale (cap. 4, paragrafi da 4.1 a 4.3)
- Rendite e piani di ammortamento (cap. 5, paragrafi 5.1, 5.2.1, 5.5.1,
5.5.2)
- Tasso interno di rendimento di un’operazione finanziaria (cap. 6, esclusi
paragrafi 6.3 e 6.4)
- Teoria delle leggi di equivalenza finanziaria (cap. 7, paragrafi 7.1, 7.2,
7.4.1, 7.5, 7.6 (esclusi 7.6.1 e 7.6.2) e 7.7)
- Parte III Le operazioni finanziarie nel mercato
- Funzione valore e prezzo di mercato (cap. 8)
- La struttura per scadenza dei tassi d’interesse (cap. 9, escluso il
paragrafo 9.5)
- Indici temporali e indici di variabilità (cap. 10, esclusi i paragrafi 10.1.8 e
10.2.6)
- La misurazione della struttura per scadenza dei tassi di interesse (cap.
11, paragrafi 11.2.1, 11.2.2 e 11.4. (cenni))
- Valutazioni di arbitraggio di piani a tasso variabile (cap. 12, escluso il
paragrafo 12.5)
- Compound interest and its generalization to the exponential growth
model (chap. 4, par. 4.1-4.3)
- Loans amortization (chap. 5, par. 5.1, 5.2.1, 5.5.1, 5.5.2)
- Internal rate of return (chap. 6, except par. 6.3 and 6.4)
- Rules of financial equivalence (chap. 7, par. 7.1, 7.2, 7.4.1, 7.5, 7.6
except 7.61. and 7.6.2)
Part III Market evaluation of contracts
- Value function and market price (chap. 8)
- Term structure of interest rates (chap. 9, except par. 9.5)
- Measures of timing and sensitivity (chap. 10, except par. 10.1.8 and
10.2.6)
- Valuation methods of the term structure of interest rates (chap. 11, par.
11.2.1, 11.2.2, 11.4)
- No-arbitrage valuation of index contracts (chap. 12, except par. 12.5)

### Teaching Methods

Frontal lections. Lab activities to develop Excel-based software
procedures to solve financial problems.

### Textbooks

G. Castellani, M. De Felice, F. Moriconi – Manuale di finanza I. Tassi
d’interesse. Mutui e obbligazioni – il Mulino editore.
J.C. Hull - Options, futures and other derivatives.

### Learning assessment

The students must take a test, using Excel, lasting 90 minutes, on the
resolution of problems related to the evaluation of financial contracts and
the construction of term structures, and an oral examination to verify the
acquired knowledge and
understanding and the ability of the student to apply the knowledge.