FM102Half UnitQuantitative Methods for Finance

This information is for the 2023/24 session.

Teacher responsible

Prof Dimitri Vayanos

Availability

This course is compulsory on the BSc in Finance. This course is not available as an outside option nor to General Course students.

Pre-requisites

Students must have completed Methods in Calculus and Linear Algebra (MA108).

Course content

The main aim of this course is to help students connect the mathematical tools that they have acquired in previous courses, including MA108, with the economics and financial models that they will be covering in their subsequent courses. Additional mathematical tools will be covered as well. All mathematical material will be covered in the context of economic and financial models.

The mathematical material covered includes (i) linear algebra, vector spaces, matrices, eigenvalues and eigenvectors, (ii) derivatives, integrals, partial derivatives, and implicit functions, (iii) unconstrained and constrained optimization, (iv) probability distributions, conditional probability, expectation and regression, (v) stochastic calculus, Ito processes and Ito’s lemma, and (vi) differential equations and partial differential equations.

The economics and financial models covered include (i) expectation and present value of uncertain cashflows, (ii) pricing of government bonds and other fixed-income securities, (iii) pricing of options and other derivatives, (iv) utility maximization and portfolio choice, (v) financing decisions by firms, and (vi) trading games between agents with public or private information.

Teaching

33 hours of seminars in the WT.

This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.

Formative coursework

Weekly homework assignments.

Mathematics for economists, Carl Simon and Lawrence Blume, W.W. Norton & Company, International Student Edition.

Assessment

Continuous assessment (100%) in the WT

Key facts

Department: Finance

Total students 2022/23: Unavailable

Average class size 2022/23: Unavailable

Capped 2022/23: No

Value: Half Unit

Guidelines for interpreting course guide information

Course selection videos

Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.

Personal development skills

• Problem solving
• Application of numeracy skills
• Specialist skills