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# Mathematical Finance in Discrete Time - MAT00096M

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• Department: Mathematics
• Credit value: 20 credits
• Credit level: M
• Academic year of delivery: 2024-25
• See module specification for other years: 2023-24

## Module summary

In this module you will learn the basic mathematics that is applied in the area of finance. In particular, you will learn how to build a theory of portfolio selection, apply no-arbitrage principle for the valuation of derivative securities and use different compounding methods to compute streams of payments. All models will be in discrete time.

## Professional requirements

Counts towards IFoA exemption.

## Related modules

• None

### Prohibited combinations

Post requisite module: Mathematical Finance in Continuous Time

## Module will run

Occurrence Teaching period
A Semester 1 2024-25

## Module aims

In this module you will learn the basic mathematics that is applied in the area of finance. In particular, you will learn how to build a theory of portfolio selection and, consequently, asset prices in both complete and incomplete markets. This theory will then be applied to the valuation of financial and real assets. All models will be in discrete time.

## Module learning outcomes

By the end of the module, students will be able to:

1. Describe, analyse, and apply the Markowitz portfolio theory

2. Describe, analyse, and apply the Capital Asset Pricing Model

3. Describe, analyse and apply basic compounding methods

4. Describe, analyse, and apply the theory of arbitrage pricing in complete markets in discrete time

5. (M-level only) Describe and analyse incomplete markets on example of the trinomial model.

## Module content

In this module you will learn the basic mathematics that is applied in the area of finance. In particular, you will learn how to build a theory of portfolio selection, apply no-arbitrage principle for the valuation of derivative securities and use different compounding methods to compute streams of payments. All models will be in discrete time.

## Indicative assessment

Task % of module mark
Closed/in-person Exam (Centrally scheduled) 80
Essay/coursework 20

None

### Additional assessment information

If a student has a failing module mark, only failed components need be reassessed.

### Indicative reassessment

Task % of module mark
Closed/in-person Exam (Centrally scheduled) 80
Essay/coursework 20

## Module feedback

Current Department policy on feedback is available in the student handbook. Coursework and examinations will be marked and returned in accordance with this policy.