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CC 302: Mathematics of Finance

Contents
This module provides an introduction to basic concepts in financial mathematics. Interest rate models constitute the core of the course. Building on these models, the module covers the valuation of cash flows, the calculation of yield rates, and investment criteria. In addition to their mathematical foundations, the module discusses advantages and disadvantages of the concepts, as well as their relevance in research and practice.

Learning outcomes
After successful completion of the module, students are well versed in the use of interest rate models, including periodic and continuous compounding. They are familiar with the cash flows of financial assets such as shares, bonds, and loans, and they can value these cash flows. Building on these skills, students are able to determine the return of investment opportunities. Moreover, they are familiar with prominent financial investment criteria and can apply these to take investment decisions.

Necessary prerequisites

Recommended prerequisites

Forms of teaching and learningContact hoursIndependent study time
Lecture2 SWS1 SWS
Exercise class2 SWS1 SWS
Tutorial2 SWS1 SWS
ECTS credits3
Graded yes
Workload90h
LanguageGerman
Form of assessmentWritten exam (45 min)
Restricted admissionno
Further information
Examiner
Performing lecturer
Prof. Dr. Simon Rother
Prof. Dr. Simon Rother
Frequency of offeringFall semester
Duration of module 0.5 semesters
Range of applicationB.Sc. Bus. Adm., other Bachelor programs (depending on respective study regulations) [9]
Preliminary course work
Program-specific Competency GoalsCG 2, CG 4
Course outline1. Basics
1.1 Introduction
1.1.1 Mathematics of finance: asset classes
1.1.2 Cash flows
1.2 Interest rates
1.2.1 Introduction
1.2.2 Compound interest (geometric interest)
1.2.4 Interest computation
1.2.5 Higher frequency and continuous compounding
1.2.6 Mixed compounding
1.3 Valuing payment flows: present value
1.4 Net present value
2. Annuities
2.1 Valuation of annuities
2.2 Annuity repayment
3. Fair value and rate of return
3.1 Fair value
3.2 Rate of return
3.2.1 Comments
3.2.2 One period investment
3.2.3 Final maturity investment
3.2.4 Many period investment