MATHEMATICAL METHODS FOR ECONOMICS AND FINANCE
The course aims to provide the basic notions for the formalization and evaluation of financial contracts and for risk control; to introduce the construction of models for measuring the value and risk of contracts and aggregates (portfolios) of contracts; to give criteria for choosing between alternative (value-risk) positions.
Knowledge and understanding: The student should be able to prove knowledge of mathematical tools and ability to identify those suitable for modeling and solving economic, financial and corporate issues.
Applying knowledge and understanding: The student should be able to demonstrate knowledge and understanding of the problems relating to the definition of the value of a contract in the capital market, the valuation of financial contracts with specific reference to bonds and mortgages in the capital market, the construction of the interest rate structure of interest, the use of financial instruments in business valuation.
Making judgements The student should be able to demonstrate to have developed a critical ability to evaluate the usefulness of the acquired knowledge and application to the resolution of economic and financial problems.
Communication: The student has to be able to argue clearly and comprehensively, the oral test questions, showing his/her ability to express and formalize mathematical / financial concepts. You must be able to explain the techniques learned for solving financial problems.
Lifelong learning skills: The student has to develop the ability to apply the knowledge acquired in previous courses by integrating them with the additional professional skills that characterize the course.
It is necessary to have acquired and assimilated the knowledge provided by the Introduction to Mathematics course, in particular those relating to the analysis of a real function of a real variable, of real functions of several real variables, of linear, exponential and logarithmic functions, to the definition and calculation of derivatives of a function, to the definition of indefinite and definite integral, to the solution of linear systems.
Block I (12 hours)
The basic theory of interest: principal and interest. Present value. Present and future values of streams. Simple interest. Compound interest. Exponential law.
Block II (12 hours)
Fixed-income securities. Rating. Value formulas. Internal rate of return. Annuities. Loan amortization.
Block III (12 hours)
Basic sources of risk. Interest rate risk. Credit risk. Inflation risk. Foreign exchange risk. No-arbitrage pricing. Coupon and zero-coupon bonds. Spot and forward rates. The term structure of interest rates. The yield curve.
Block IV (12 hours)
Par yield. Bootstrapping. Duration. Convexity.
The basic theory of interest. Fixed-income securities. Internal rate of return. Annuities. Loan amortization. Basic sources of risk. No-arbitrage pricing. Coupon and zero-coupon bonds. Spot and forward rates. The term structure of interest rates. The yield curve. Par yield. Bootstrapping. Duration. Convexity.
The course includes frontal lessons, during which the themes of the program are discussed, and exercises in attendance. The student can practice and consolidate his skills in the course section on the E-learning platform at the "Parthenope" University.
• G. Castellani, M. De Felice, F. Moriconi – Manuale di finanza I. Tassi d’interesse. Mutui e obbligazioni – il Mulino editore.
• E. Castagnoli, M. Cigola, L. Peccati. Financial calculus with applications. Egea, 2013.
The assessment is based on written examination and an oral interview. The student should be able to demonstrate acquired theoretical knowledge and theoretical-practical skills, by answering a test consisting of nine multiple choice questions and one open and supporting the performance of two exercises with the theoretical motivations regarding the methods of resolution chosen. Each multiple choice question assigns a score of 1 in case of correct answer, 0 in case of wrong answer or not given, the answer to the open question assigns a maximum score of 5, the two exercises assign a maximum score of 16 The time to complete the test is one hour and fifteen minutes. During the exam the use of notes, books and informatics devices -smartphone, tablet, pc, ecc.- is not allowed. The evaluations of the oral exam, expressed out of thirty, and that of the written test contribute with equal weight to the definition of the final grade.
The evaluations of the written and oral tests contribute to the definition of the final grade. Due to Covid-19, the exams will be held in the presence or at a distance according to the indications of the University.
During the course there are two partial tests, one in the middle of the semester and one at the end. These tests will be structured in a similar way to the written test. The final mark will be determined as the average of the marks of the two tests. The achievement of a minimum of 18 points determines admission to the oral exam.