MATHEMATICS FOR ECONOMICS AND FINANCE -1

This course aims to present mathematical, financial and computational tools that allow studying decision problems that arise in domestic and international financial markets.

1. Knowledge and understanding skills.
- to obtain the basic vocabulary needed to engage with theoretical and practical problems related to the valuation of debts and financial investments,
- to describe the characteristics and the properties of financial instruments (loans, mortgages, annuities, sovereign and corporate bonds) and their markets;
- to understand the risk profiles of financial operations with particular reference to bonds and financial operations involving foreign currencies;

2. Ability to apply knowledge and understanding.
- to identify the relevant elements in a financial problem with particular attention to the risk profiles;
- to collect and organize data necessary to carry out a financial analysis of the problem
- to compare models and financial instruments discussed in the course;
- sto olve valuation problems.

3. Judgment skills, communication skills, learning skills.
- with reference to a specific financial problem, to discuss the suitability of a financial instruments, to choose the most convenient alternative, and to choose the appropriate valuation method.
- to formulate rational justifications for the approach used to solve financial problems, understanding their relative strengths and weaknesses, by means of hypotheses, data and models;
- to know how to formulate and communicate an adequate analysis and interpretation of a financial operation/instrument also through the use of mathematical models.

Mandatory priority exam: see https://www.unive.it/web/en/4347/exams

1. Elements of financial mathematics with emphasis on a cash flow approach: time value of money, present value, future value. Financial regimes: simple interest, compound interest, discount. Equivalent rates, inflation.
2. Foreign currencies and exchange rates. Exchange rate risk and its effects on profitability of financial operations.
3. Annuities, Sinking funds, Mortgages.
4. Fixed income securities, valuation of bonds and elements of term structure of interest rates.
5. Duration and elements of bond portfolio immunization.
6. Evaluation and management of alternative opportunities.

- A. Basso, P. Pianca, Introduzione alla Matematica Finanziaria (III edizione), Wolters Kluwer, 2017
- M. Corazza, L'n-esimo eserciziario di Matematica Finanziaria, Giappichelli, 2017
- Further material made available on-line on the course website in moodle.unive.it

Written exam divided into a set of problems to verify the skills in solving specific financial problems.

The course consists of 30 hours of frontal teaching. An additional 10 hours of practices are planned. Didactic material for the verification of learning will be made available on Mooodle.

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