Mathematics 483, Mathematical Models in Finance and Investments, Fall 2004

Illinois State University Mathematics Department

Instructors

Classes Meet

Tuesdays and Thursdays 7:00-8:50 p.m. (with a ten minute break), in Stevenson Hall, room 310.

Office Hours

Office hours will be held Tuesdays and Thursdays 3:00-3:50 p.m. by Dr. Krzysztof Ostaszewski. Please ask for an appointment at other times.

Textbooks

Financial Economics, edited by Harry Panjer, published in 1998 by the Actuarial Foundation. This book is available at the ISU bookstore. You are also encouraged to obtain Actex Manuals for the Society of Actuaries Course 6 examination, as well as the Society of Actuaries Course 8 examination in the Investment track, as supplementary textbooks. In addition to these textbooks, Dr. Ostaszewski has written study notes for the material covered in this class, which are provided in links below. Note that you must use the ISU ULID with your password to access them, and you are only granted access if you are registered in this class.

Objective

The objective of this class is to help you learn about mathematical models in finance and investments. The class will cover a major portion (the mathematical part) of the material tested on the Society of Actuaries Course 6 examination and the Casualty Actuarial Society Course 8 examination, but not all of it.

Grading

There will be four tests and a final examination. You can have a make-up test, but a make-up will be made intentionally at least 20% more difficult. The final will count as 40% of your grade, and the best two of the four tests will count as 30% of your grade each. The grading scale will be as follows: 90% or better — A, 80% to 90% — B, 70% to 80% — C, 60% to 70% — D, below 60% — F. You will also receive up to 20% extra credit for the better of the your two worst tests, and 20% for class participation. Class participation will be expressed by making presentations of study notes readings for the Society of Actuaries Course 6 examination and the Casualty Actuarial Society Course 8 examination.

Important dates

September 3, 2004: Last day to withdraw with no withdrawal grade assigned. Also last day to put a course on Credit/No Credit (Pass/Fail) or Audit.
October 15, 2004: Last day to withdraw with a writhdrawal (WI) grade assigned. Also last day to drop the Credit/No Credit (Pass/Fail) option.

Schedule of classes

• Tuesday, August 24, 2004. Chapter 1 (Financial Markets). Class taught by Mr. Dale Hall.
• Thursday, August 26, 2004. Chapter 2 (Derivative Securities). Class taught by Mr. Dale Hall.
• Tuesday, August 31, 2004. Chapter 2 (Derivative Securities). Class taught by Mr. Dale Hall.
• Thursday, September 2, 2004. Chapter 2 (Derivative Securities). Class taught by Mr. Dale Hall.
• Tuesday, September 7, 2004. Chapter 3 (Interest Rate Risk and Immunization).
• Thursday, September 9, 2004. Chapter 3 (Interest Rate Risk and Immunization).
• Tuesday, September 14, 2004. Chapter 3 (Interest Rate Risk and Immunization).
• Thursday, September 16, 2004. Test No. 1, covering Chapters 1-3.
• Tuesday, September 21, 2004. This class will be replaced by the Actuarial Meet the Firms event.
• Thursday, September 23, 2004. Chapter 4 (Equilibrium Pricing). Class taught by Mr. Dale Hall.
• Tuesday, September 28, 2004. Chapter 4 (Equilibrium Pricing). Class taught by Mr. Dale Hall.
• Thursday, September 30, 2004. Chapter 4 (Equilibrium Pricing). Class taught by Mr. Dale Hall.
• Tuesday, October 5, 2004. Chapter 5 (No-Arbitrage Pricing Theory).
• Thursday, October 7, 2004. Chapter 5 (No-Arbitrage Pricing Theory).
• Tuesday, October 12, 2004. Chapter 5 (No-Arbitrage Pricing Theory).
• Thursday, October 14, 2004. Chapter 6 (Options and Other Derivatives). Class taught by Mr. Dale Hall.
• Tuesday, October 19, 2004. Chapter 6 (Options and Other Derivatives). Class taught by Mr. Dale Hall.
• Thursday, October 21, 2004. Chapter 6 (Options and Other Derivatives). Class taught by Mr. Dale Hall.
• Tuesday, October 26, 2004. Test No. 2, covering Chapters 1-5.
• Thursday, October 28, 2004. Chapter 7 (Term Structure Models).
• Tuesday, November 2, 2004. Chapter 7 (Term Structure Models).
• Thursday, November 4, 2004. Risk-Based Capital. Class taught by Mr. Dale Hall.
• Tuesday, November 9, 2004. Shortfall Constraints.
• Thursday, November 11, 2004. Chapter 7 (Term Structure Models).
• Tuesday, November 16, 2004. Chapter 7 (Term Structure Models).
• Thursday, November 18, 2004. Value at Risk.
• Tuesday, November 30, 2004. Value at Risk.
• Thursday, December 2, 2004. Review.
• Tuesday, December 7, 2004. Test No. 3, comprehensive.
• Thursday, December 9, 2004. Test No. 4, comprehensive.
• Thursday, December 16, 5:30 p.m., Test No. 5, comprehensive.

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All information contained here is, to our best knowledge, correct, but it is merely a representation, and should not be considered to be any form of professional advice. This electronic publication should not be misconstrued as the official position of Illinois State University, or its Department of Mathematics. We are glad to provide as much information as possible here, but we kindly ask that in any decision related to matters listed here you seek additional counsel and information. Comments on this Home Page are welcome and should be sent to Dr. Krzysztof Ostaszewski  at his e-mail address: krzysio@ilstu.edu.