Mathematical Finance (GRAE017)

This introductory course surveys various mathematical concepts utilised in financial economics. Together with Financial Econometrics, it constitutes the foundation of the ‘research’ pillar in MSc Financial Economics at ISM. As such, some of the topics will be ‘repeated’ in greater depth in other courses. This course serves dual purposes: ensuring students have the mathematical preparation needed to further study financial economics and introducing them to the rigorous mathematical models used in modern academic and professional financial modeling. The first part of the course will ensure students have appropriate knowledge of set theory, relations, linear algebra, probability, and optimization. The course will quickly transition to the study of stochastic asset pricing using modern theory that applies to stocks, bonds, and options. The course will conclude with analysis of modern financial markets from around the globe. Emphasis will be not only on problem solving, but also on intuitive understanding of theory and application, history, and communication of ideas.

• Illustrate and utilise the axioms of rationality in pricing.
• Define and explain interest rates as they are applied to different types of debt instruments.
• Define and explain the structuring considerations for various derivative products.
• Identify issues and projects surrounding the rapidly changing world such as hybrid securities, financial engineering, and blockchain.