## MATHEMATICAL FINANCE

## Program

### Updated A.Y. 2019-2020

B.S. in Business Administration and Economics University of Rome Tor Vergata

Fall 2018

Mathematical Finance

Stefano Herzel

Course Description

The course is an introduction to the theory of valuation of financial assets. It provides the basic tools for evaluating deterministic cash flows and random cash flows with a mean-variance approach and to the modeling of decisions through the optimization of a utility function.

It covers the following topics:

• Deterministic Cash Flow Streams

1. The Basic Theory of Interest

2. Fixed Income Securities

3. The term structure of interest rates

• Random Cash Flows

1. Mean-Variance Portfolio Theory

2. Utility Functions and Risk Aversion

• A micro-approach to Asset Pricing

1. Investor’s preferences and prices

2. Investor’s beliefs and prices

3. Asset Pricing in incomplete Markets

Textbook

David G. Luenberger, ”Investment Science” , Oxford University Press (2013)

Prerequisites

Basic knowledge of Mathematics and Statistics.

Evaluation

The final grade will be determined by class participation and homework (20%) and a final exam (80%).