FINANCIAL TOOLS AND ACTUARIAL TECHNIQUES - 1

The course is core for the degree in economics and finance and is divided into two parts. The first part of the course deals with the study of the pricing of derivatives: forwards, futures, swaps and financial options. At the end of this part the student will know how these products, their use, how they are evaluated and how to cover the risks associated with their trading. Are also briefly presented the valuation of bonds the term structure of interest rates, stocks evaluation, mutual funds performances.
The second part introduces the insurance and in particular deals with the study of life insurance and insurance on the life span.

1. Knowledge and understanding:
1.1. To make known the main financial products present in all evolved markets
1.2. Understand and be able to manage quantitative techniques for the pricing of the main financial products
1.3 Avoiding the unsuitable use of practical techniques in order to arrive at the result using a rational and non-mnemonic methodology.
2. Ability to apply knowledge and understanding:
2.1. Implement mathematical models for the resolution of operational problems
2.2. Use the solution technique that best lends itself to addressing the individual problems proposed
3. Ability to judge:
3.1. Knowing how to interpret results obtained after having tested their correctness
3.2. Being able to recognize the efficiency and the limits of the models used

Students are expected to know the basic elements of financial mathematics, as they are taught in a course of Financial Mathematics at the laurea/bachelor degree:
- Basics of interest rates.
- Separability.
- Annuities.
- Amortization of a debt.

In addition, students are expected to be familiar with mathematical analysis elements of statistics:
- Real Functions. Derivatives. Integrals.
- Exploratory data analysis (univariate distributions, location and variability summaries, graphical representations).
- Probability (interpreting probability, probability rules, univariate random variables, law of large numbers and central limit theorem).
- Basic techniques of statistical inference (point and interval estimation, hypothesis testing).

QUANTITATIVE FINANCE (First part)
1. Basic Finance (time value of money, simple financial transactions)
2. Basics on bonds: types of fixed-income securities and their characteristics; fixed-income markets: characteristics and institutions; fixed-income valuation and return analysis: pricing, risks, interest rate structure, yield spreads; negative returns; analysis of duration.
3. Stocks: dynamics, dividends and pricing. Mutual funds performance.
4. Forwards and futures: mechanics of futures markets; hedging strategies using futures; pricing of forwards and futures on
stocks, stock indices, currencies, commodities. Futures on T-bonds.
5.Swaps Markets and Valuation of Swaps Contracts on interest rates. Currency Swaps.
6. Credit Derivatives Markets. Credit default Swaps: properties and evaluation.
7. Credit issues in derivatives markets: basics on CVA and DVA.
8. Financial Options: markets of options, mechanics of option contracts. Properties and strategies involving options
9. Discrete and continuous pricing models (binomial and BSM models)

QUANTITATIVE FINANCE
J. Hull, "Opzioni, futures e altri derivati", Pearson-Prentice Hall, Milano, decima ed. italiana, 2018, pagg. 968 (main book): capitoli 1,2,4-7 (tranne i par. 6.3, 6.4, 6.5), 9-15, 17-19,21
J. Hull, "Opzioni, futures e altri derivati: Manuale delle soluzioni", Pearson-Prentice Hall, Milano, decima ed. italiana, 2018
M. Rubinstein, "Derivati", Il Sole 24 Ore, Milano, 2005
P. Wilmott, "Introduzione alla finanza quantitativa", Egea, Milano, 2003
S. Benninga, "Modelli finanziari. La finanza con Excel", McGraw-Hill, Milano, 2001

Lecture notes.

Grading is based on a final written exam, taken at the end of the 12-ECTS course. The expected duration is one and a half hours.
This consists of 3 or 4 exercises to be solved..
The objective of the exercises is to test the student's ability to understand the financial problem given, to choose the most appropriate tools for solving it and to apply the abilities acquired in order to compute the solution.
The exam is closed-notes and closed-book, but students are allowed to use a pocket calculator and two sides of an A4-sheet prepared by themselves at home with the main formulae (only formulae, not written comments or notes), handwritten with "normal" size .
For students attending classes, it is possible to pass the exam making two intermediate test.

Conventional methods with use of Moodle e-learning platform.

Italian

Accessibility, Disability and Inclusion
Accommodation and support services for students with disabilities and students with specific learning impairments
Ca' Foscari abides by Italian Law (Law 17/1999; Law 170/2010) regarding support services and accommodation available to students with disabilities. This includes students with mobility, visual, hearing and other disabilities (Law 17/1999), and specific learning impairments (Law 170/2010). If you have a disability or impairment that requires accommodations (i.e., alternate testing, readers, note takers or interpreters) please contact the Disability and Accessibility Offices in Student Services: disabilita@unive.it.

written

This subject deals with topics related to the macro-area "Human capital, health, education" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development