Mathematics 483, Mathematical Models in Finance and Investments, Fall 2005

Illinois State University Mathematics Department

Instructors

Classes Meet

Tuesdays and Thursdays 4:00-5:50 p.m. (with a ten minute break), in Stevenson Hall, room 310.

Office Hours

Office hours will be held Tuesdays and Thursdays 3:00-4:00 p.m. by Dr. Krzysztof Ostaszewski. Please ask for an appointment at other times.

Textbooks

Main textbook: Financial Risk Management for Pension Plans by Leslaw Gajek and Krzysztof Ostaszewski, Elsevier Science, 2004. This book is on reserve at the Milner Library at Illinois State University. There will also be study notes provided online by Dr. Krzysztof Ostaszewski (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).
Supplementary textbook: Financial Economics, edited by Harry Panjer, published in 1998 by the Actuarial Foundation. This book is on reserve at the Milner Library at Illinois State University.

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. Any make-up test must be scheduled at least two weeks in advance. 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 2, 2005: 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 14, 2005: Last day to withdraw with a writhdrawal (WI) grade assigned. Also last day to drop the Credit/No Credit (Pass/Fail) option.

Disability concerns

Illinois State University provides a welcoming atmosphere for individuals with disabilities by assisting each in functioning independently within the University community and providing equal access and opportunity in accomplishing educational, professional and personal goals. Disability Concerns, a unit of the Student Affairs Division,  is the designated office to provide approved accommodation services for students, faculty, staff, and guests with disabilities. Disability Concerns obtains and maintains documentation of disability, certifies eligibility for services, determines reasonable accommodations, and develops plans for providing such accommodations. This is accomplished in a confidential manner to ensure equal opportunity for participation in all courses, programs, activities and employment offered by Illinois State University. Please contact the Disability Concerns in Fell Hall room 350, tel.  309-438-5853 (Voice), 309-438-8620 (TTY) if you have needs that can be accommodate by that office.

Schedule of classes

• Tuesday, August 23, 2005. Financial Markets. Class taught by Mr. Dale Hall.
• Thursday, August 25, 2005. Derivative Securities. Class taught by Mr. Dale Hall.
• Tuesday, August 30, 2005. Derivative Securities. Class taught by Mr. Dale Hall.
• Thursday, September 1, 2005. Derivative Securities. Class taught by Mr. Dale Hall.
• Tuesday, September 6, 2005. Interest Rate Risk and Immunization.
• Thursday, September 8, 2005. Interest Rate Risk and Immunization.
• Tuesday, September 13, 2005. Interest Rate Risk and Immunization. 
• Thursday, September 15, 2005. Test No. 1, on the material covered through September 13, 2005.
• Tuesday, September 20, 2005. Enterprise Risk Management.
• Thursday, September 22, 2005. Equilibrium Pricing. Class taught by Mr. Dale Hall.
• Tuesday, September 27, 2005. Equilibrium Pricing. Class taught by Mr. Dale Hall.
• Thursday, September 29, 2005. Equilibrium Pricing. Class taught by Mr. Dale Hall.
• Tuesday, October 4, 2005. No-Arbitrage Pricing Theory.
• Thursday, October 6, 2005. No-Arbitrage Pricing Theory.
• Tuesday, October 11, 2005. No-Arbitrage Pricing Theory.
• Thursday, October 13, 2005. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Tuesday, October 18, 2005. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Thursday, October 20, 2005. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Tuesday, October 25, 2005. Test No. 2, on the material covered through October 20, 2005.
• Thursday, October 27, 2005. Shortfall Constraints.
• Tuesday, November 1, 2005. Risk-Based Capital. Class taught by Mr. Dale Hall.
• Thursday, November 3, 2005. Value at Risk.
• Tuesday, November 8, 2005. Value at Risk.
• Thursday, November 10, 2005. Allocation of Capital in the Insurance Industry.
• Tuesday, November 15, 2005. Term Structure Models.
• Thursday, November 17, 2005. Term Structure Models.
• Tuesday, November 29, 2005. Term Structure Models.
• Thursday, December 1, 2005. Term Structure Models.
• Tuesday, December 6, 2005. Test No. 3, comprehensive.
• Thursday, December 8, 2005. Test No. 4, comprehensive.
• Friday, December 16, 2005, 10:00 a.m. — 12:00 noon, 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.