Mathematics 483, Mathematical Models in Finance and Investments, Fall 2002

Illinois State University Mathematics Department


Instructor
Dr. Krzysztof Ostaszewski, FSA, CFA, MAAA
Actuarial Program Director
Office: Stevenson Hall, room 313G.
Telephone: 309-438-7226, Fax: 309-438-5866.
E-mail: krzysio@ilstu.edu

Classes Meet
Tuesdays and Thursdays 5:20-7:10 p.m. (with a ten minute break), in Stevenson Hall, room 310.

Office Hours
Tuesdays and Thursdays 2:20-3:20 p.m. Please ask for an appointment at other times.

Textbook
Financial Economics, edited by Harry Panjer, published in 1998 by the Actuarial Foundation. This book is available at the ISU bookstore. You are also encouraged to obtain Actex Manuals as supplementary textbooks.

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. 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. You will be also given an opportunity for earning 10% extra credit for homework problems, and 10% extra credit for in class random quizes.
Schedule of classes
  • Tuesday, August 20, 2002. Chapter 1 (Financial Markets).
  • Thursday, August 22, 2002. Chapter 2 (Derivative Securities).
  • Tuesday, August 27, 2002. Chapter 2 (Derivative Securities).
  • Thursday, August 29, 2002. Chapter 2 (Derivative Securities).
  • Tuesday, September 3, 2002. Chapter 3 (Interest Rate Risk and Immunization).
  • Thursday, September 5, 2002. Chapter 3 (Interest Rate Risk and Immunization).
  • Tuesday, September 10, 2002. Chapter 3 (Interest Rate Risk and Immunization).
  • Thursday, September 12, 2002. Chapter 3 (Interest Rate Risk and Immunization).
  • Tuesday, September 17, 2002. Chapter 4 (Equilibrium Pricing).
  • Thursday, September 19, 2002. Chapter 4 (Equilibrium Pricing).
  • Tuesday, September 24, 2002. Chapter 4 (Equilibrium Pricing).
  • Thursday, September 26, 2002. Chapter 4 (Equilibrium Pricing).
  • Tuesday, October 1, 2002. Chapter 5 (No-Arbitrage Pricing Theory).
  • Thursday, October 3, 2002. Test No. 1, covering Chapters 1-4.
  • Tuesday, October 8, 2002. Chapter 5 (No-Arbitrage Pricing Theory).
  • Thursday, October 10, 2002. Chapter 5 (No-Arbitrage Pricing Theory).
  • Tuesday, October 15, 2002. Chapter 5 (No-Arbitrage Pricing Theory).
  • Thursday, October 17, 2002. Chapter 6 (Options and Other Derivatives).
  • Tuesday, October 22, 2002. Chapter 6 (Options and Other Derivatives).
  • Thursday, October 24, 2002. Test No. 2, covering Chapters 1-5.
  • Tuesday, October 29, 2002. Chapter 6 (Options and Other Derivatives).
  • Thursday, October 31, 2002. Chapter 6 (Options and Other Derivatives).
  • Tuesday, November 5, 2002. Chapter 7 (Term Structure Models).
  • Thursday, November 7, 2002. Chapter 7 (Term Structure Models).
  • Tuesday, November 12, 2002. Test No. 3, covering Chapters 1-5.
  • Thursday, November 14, 2002. Chapter 7 (Term Structure Models).
  • Tuesday, November 19, 2002. Chapter 7 (Term Structure Models).
  • Thursday, November 21, 2002. Chapter 7 (Term Structure Models).
  • Tuesday, November 26, 2002. Section 8.5 (Shortfall Constraints).
  • Tuesday, December 3, 2002. Section 8.5 (Shortfall Constraints).
  • Thursday, December 5, 2002. Test No. 4, covering Chapters 1-8.
  • Tuesday, December 10, 5:30 p.m. -- 7:30 p.m. Final examination, comprehensive.