VSFS:B_FIM Financial and Investment Math - Course Information

B_FIM Financial and Investment Mathematics

Extent and Intensity

2/1/0. 6 credit(s). Type of Completion: zk (examination).

Guaranteed by

PaedDr. Renata Majovská, PhD.
Department of Computer Science and Mathematics – Departments – University of Finance and Administration
Contact Person: Ivana Plačková

Prerequisites

There are no prerequisites for this course.

Course Enrolment Limitations

The course is offered to students of any study field.

Course objectives

The aim of the course is:
- explain the concepts of interest
- describe different types and kinds of interest
- calculate the future and present value of the investment and its return
- explain the concept of bond, including the rules for counting and valuation
- explain and calculate the duration and convexity
- explain the principles of neutralization bond portfolio
- establish a portfolio composed of two bonds
- explain the principles of the derivatives and their use
- describe the basic strategy of investing in portfolios

Learning outcomes

At the end of this course the student will be able to:
- understand and explain simple and compound interest
- use knowledge on the calculation of the basic characteristics of bonds (yield, price, duration, convexity)
- explain the principles of neutralization bond portfolio
- build the portfolio of equities and derivatives
- describe the basic strategy of investing in portfolios

Syllabus

• 1. Interest rate. Simple and compound interest, frequency of interest. Continuous interest. Yield, present and future value, discounting. Calculation of the present value of the investment.
• 2. Calculation of income at a fixed present and future value, recalculation of income at different frequency of interest.
• 3. Classification of bonds. Bond face value, coupon rate, bond yield. Bond price calculation for zero-coupon bond, annuity and perpetuity.
• 4. Rules for counting bonds. The relationship between bond price and yield. Relationship between coupon rate and bond yield. 5. Aliquot interest yield, gross and net price of the bond. Calculation of the net price of the bond.
• 6. Bond price sensitivity to yield changes. Modified and Macaulay duration, bond convexity and their properties and calculation.
• 7. Investment in bonds. Reinvestment and capital risk. Duration and investment horizon.
• 8. Bond portfolio, its duration and convexity. Building a bond portfolio for a predetermined duration equal to the investment horizon.
• 9. Stock portfolio, its construction, unique and market risk.
• 10. Markowitz model, set of admissible portfolios.
• 11. Derivative portfolio I - forward contracts and options, basic income graphs depending on the price of the underlying asset.
• 12. Derivative portfolio II - spread, combination and hedging strategies.

Literature

required literature
• Budinský, P. : Finanční a investiční matematika. Praha : VŠFS, 2016.

recommended literature
• Šoba, O., Širůček, M.: Finanční matematika v praxi. Praha: Grada, 2017

Teaching methods

Lectures and seminars in full-time study, tutorials in part-time study, Minimal required participation is 75% on seminars in full-time study and 50% in tutorials in part-time study. Students with lower than required participation have to fulfill additional study duties.
Students with ISP have the same duties. Compulsory attendance is not required.

Assessment methods

Method of completion: in order to be awarded credit, it is necessary to successfully write a credit test (51% of points) and 75% participation in the exercise, for the exam, you must successfully write an examination test (51% of correct answers) and take an oral exam.

Language of instruction

Czech

Further comments (probably available only in Czech)

The course can also be completed outside the examination period.
Information on the extent and intensity of the course: 12 hodin KS/semestr.

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