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Mathematics of Compound Interest

  • Teacher(s):   S.Arnold  
  • Course given in: English
  • ECTS Credits: 3 credits
  • Schedule: Autumn Semester 2019-2020, 2.0h. course (weekly average)
  •  sessions
  • site web du cours course website
  • Related programme: Master of Science (MSc) in Actuarial Science

 

Objectives

The goal of the course is to provide the students with the understanding of fundamental concepts of financial mathematics applied in calculating present and accumulated values for various streams of cash flows.

The students will become familiar with essential basic actuarial concepts and tools used in other courses of the Actuarial Science Master programme. Most of the topics are also part of the syllabus for the Financial Mathematics exam of the Society of Actuaries and the Casualty Actuarial Society.

Contents

1. Interest rates
2. Valuation of a series of payments
3. Loan repayment
4. Return rates
5. Bond valuation
6. Term structure of interest rates
7. Cash flow duration and immunization

References

Broverman, S.A., 2004, Mathematics of Investment and Credit, Third Edition, Actex Publications, Winsted, CT.
Kellison, S.G., 1991, The Theory of Interest, Second Edition, McGraw-Hill, Boston,
MA.
Gerber, H.U., 1997, Life Insurance Mathematics, Second Edition, Springer, Berlin.

Pre-requisites

Basic knowledge of calculus and an introductory knowledge of probability.

Evaluation

First attempt

Exam:
Written 2h00 hours
Documentation:
Not allowed
Calculator:
Allowed with restrictions
Evaluation:

Midterm exam: Optional.

Final written exam.

If the grade of the midterm exam is higher than the grade of the final exam, the final grade = 0.3 * Midterm_Exam + 0.7 * Final_Written_Exam.

If the grade at the final exam is higher than the grade of the midterm, the final grade = Final written exam.

Retake

Exam:
Written 2h00 hours
Documentation:
Not allowed
Calculator:
Allowed with restrictions
Evaluation:

Same as above.



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