Mathematics 483, Mathematical Models in Finance and Investments, Fall 2007

Illinois State University Mathematics Department

Instructors

Classes Meet

Tuesdays and Thursdays 7:00-8:50 p.m. (with a ten minute break), in Williams Hall, room 313.

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 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 and on reserve at the library of the Department of Mathematics.

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.

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). We will also use study notes and problems from past actuarial examinations on investments. Links to those readings will be posted at the bottom of this syllabus, after the schedule of classes.

Objective

The objective of this class is to help you learn about mathematical models in finance and investments.

Grading

There will be a total of six tests. Any of the comprehensive tests (as indicated in the schedule) can count as a final. Because there will be so many opportunities for testing and only the best four test scores will affect the class grade, no make-up tests will be offered. The final will count as 40% of your grade, and the best two of the remaining tests will count as 30% of your grade each. You will also receive up to 20% extra credit for the best of the remaining tests. The grading scale for will be as follows: 90% or better — A, 80% to 90% — B, 70% to 80% — C, 60% to 70% — D, below 60% — F.

Important dates

Illinois State University withdrawal information for the Fall 2007 semester is given at this web site: http://www.registrar.ilstu.edu/crd/withdrawal/withdrawfall.shtml

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 21, 2007. Financial Assets. Class taught by Mr. Dale Hall.
• Thursday, August 23, 2007. Derivative Securities. Section 7.3 in first texbook. Class taught by Mr. Dale Hall.
• Tuesday, August 28, 2007. Derivative Securities. Section 7.3 in first texbook. Class taught by Mr. Dale Hall.
• Thursday, August 30, 2007. Derivative Securities. Section 7.3 in first texbook. Class taught by Mr. Dale Hall.
• Tuesday, September 4, 2007. Interest Rate Risk and Immunization. Chapter 9 in first textbook.
• Thursday, September 6, 2007. Interest Rate Risk and Immunization. Chapter 9 in first textbook.
• Tuesday, September 11, 2007. Interest Rate Risk and Immunization. Chapter 9 in first textbook.
• Thursday, September 13, 2007. Interest Rate Risk and Immunization. Chapter 9 in first textbook.  
• Tuesday, September 18, 2007. This class will be rescheduled to accommodate the Meet the Firms event.
• Thursday, September 20, 2007. Test No. 1, on the material covered through September 18, 2007.
• Tuesday, September 25, 2007. No-Arbitrage Pricing Theory. Sections 7.1.4, 7.1.5, 7.2 in first textbook.
• Thursday, September 27, 2007. No-Arbitrage Pricing Theory. Sections 7.1.4, 7.1.5, 7.2 in first textbook.
• Tuesday, October 2, 2007. No-Arbitrage Pricing Theory. Sections 7.1.4, 7.1.5, 7.2 in first textbook.
• Thursday, October 4, 2007. Equilibrium Pricing. Sections 7.1.2, 7.1.3 in first textbook. Class taught by Mr. Dale Hall.
• Tuesday, October 9, 2007. Equilibrium Pricing. Sections 7.1.2, 7.1.3 in first textbook. Class taught by Mr. Dale Hall.
• Thursday, October 11, 2007. Equilibrium Pricing. Sections 7.1.2, 7.1.3 in first textbook. Class taught by Mr. Dale Hall.
• Tuesday, October 16, 2007. Test No. 2, on the material covered through October 2, 2007.
• Thursday, October 18, 2007. Insurance Securitization.
• Tuesday, October 23, 2007. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Thursday, October 25, 2007. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Tuesday, October 30, 2007. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Thursday, November 1, 2007. Options and Other Derivatives. Class taught by Mr. Dale Hall.
• Tuesday, November 6, 2007. Shortfall Constraints. Sections 10.1.1, 10.1.3 in first textbook.
• Thursday, November 8, 2007. Risk-Based Capital.
• Tuesday, November 13, 2007. Value at Risk.
• Thursday, November 15, 2007. Enterprise Risk Management.
• Tuesday, November 27, 2007. Interest Rate Derivative Securities.
• Thursday, November 29, 2007. Test No. 3, comprehensive.
• Tuesday, December 4, 2007. Test No. 4, comprehensive.
• Thursday, December 6, 2007. Test No. 5, comprehensive.
• Thursday, December 13, 2007. 5:30 p.m. — 7:30 p.m. Test No. 6, 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.