BA_FIM Financial and Investment Mathematics

University of Finance and Administration
Winter 2016
Extent and Intensity
2/1/0. 5 credit(s). Type of Completion: zk (examination).
Teacher(s)
doc. RNDr. Petr Budinský, CSc. (lecturer)
Ing. Eva Kostikov, Ph.D. (seminar tutor)
Guaranteed by
doc. RNDr. Petr Budinský, CSc.
Department of Computer Science and Mathematics – Departments – University of Finance and Administration
Contact Person: Ing. Barbora Ptáčková
Timetable of Seminar Groups
BA_FIM/cBMPH: Tue 18. 10. 10:30–12:00 E122, Tue 1. 11. 10:30–12:00 E125, Tue 22. 11. 10:30–12:00 E122, Tue 6. 12. 10:30–12:00 E122, Tue 13. 12. 10:30–12:00 E122, 14:00–15:30 E124, P. Budinský
BA_FIM/pBMPH: Tue 15:45–16:29 E225, Tue 16:30–17:15 E225, except Tue 22. 11., except Tue 20. 12. ; and Wed 7. 12. 8:45–10:15 E129, Tue 20. 12. 15:45–17:15 E007KC, P. Budinský, E. Kostikov
Course Enrolment Limitations
The course is offered to students of any study field.
Course objectives
At the end of this course the student will be able to understand and explain simple and compound interest. They will also acquire knowledge on the calculation of the basic characteristics of bonds (yield, price, duration, convexity), learn to build the portfolio of equities and derivatives . At the end of this course the student will be able to: - Explain the concepts of interest, annual interest rate - 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 - 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
Syllabus
  • 1. Interest and annual interest rate. Simple and compound interest, frequency of compounding. Continuous compounding. 2. Interest rate and yield, present and future value, principle of discounting. Calculation of present value of an investment 3. Yield calculation for given present and future value, recalculation of yields for different frequencies of compounding 4. Classification of bonds. The nominal value of the bond, coupon rate, bond yield to maturity. Calculation of bond price for zero-coupon bond, annuity and perpetuity 5. Rules for bonds calculation. Relationship between bond price and yield. Relationship between coupon rate and bond yield. 6. Accrued interest, gross and clean price of the bond. Calculation of clean price of the bond 7. Sensitivity of bond prices to changes in yields. Modified and Macaulay duration, convexity 8. Bond duration and convexity properties. Calculation of bond duration and convexity 9. Investing in the bonds. Reinvestment and capital risk. Duration and investment horizon 10. Bond portfolio, its duration and convexity. Construction of bond portfolio for given duration equal to the investment horizon 11. Derivates Portfolio I – forward contracts and options, basic graphs of profits depending on the price of the underlying asset 12. Derivates Portfolio II – strategies as spread, combination and hedging
Literature
    required literature
  • Block S., Hirt G., Danielsen B.: Foundations of Financial Management, McGraw-Hill/Irwin, New York NY, 2009, 13th Edition, ISBN978-0-07-128525-4
  • RICHARD A. BREALEY, Richard A. Principles of corporate finance. 10th ed. [international edition]. Boston, Mass: McGraw-Hill, 2011. ISBN 978-007-1266-758.
  • P. Budinský, P. Záškodný: Finanční a investiční matematika, Praha 2004
    recommended literature
  • J. O. Grabbe: International Financial Markets, Elsevier Sc. Publ., 1986
  • J. Hull: Options, Futures and Other Derivative Securities, Prentice-Hall 1993
  • P. Budinský, P. Záškodný: Ekonomická statistika, Praha 2004.
  • D. Blake: Analýza finančních trhů, Grada Publ., Praha 1995
Teaching methods
eaching consists of lectures and exercises in full-time studies and controlled group consultations in the form of study. Minimum mandatory participation in exercises in full-time studies is 75%, the controlled group consultations in combined form 50%. Students who fail to meet the mandatory level of participation may be given during the semester additional study obligations (to the extent that will demonstrate academic achievement and acquired competencies necessary for successful completion of course).
Assessment methods
During one semester is required home work aimed at calculating the net price of the bond   details found on www.patria.cz; prerequisites: at least 80%-participation in the exercises and pass the written test - 10 closed questions a), b), c), d) - passed if at least 8 correctly test conditions: successful completion of the written - 4 examples (max 20 points) - to advance to the oral exam   must reach at least 10 points and then oral
Language of instruction
English
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: 10 hodin KS/semestr.
The course is also listed under the following terms Winter 2013, Winter 2014, Winter 2015, Winter 2017, Winter 2018, Winter 2019, Winter 2020, Summer 2021, Summer 2022, Summer 2023, Summer 2024, Summer 2025.
  • Enrolment Statistics (Winter 2016, recent)
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