Financial Math

The fundamentals of financial math are used over and over in the finance world - from bond calculations used in fixed income to discounted cash flow valuation techniques used in investment banking and equity research. Here you will learn, from the bottom up, the principles of the time value of money. During this session we will go from the basics to some of the more detailed applications of these basics in the financial world.

Basic financial concepts in bonds and other financial instruments.

Basic financial concepts in bonds and other debt instruments.

Basic financial math for valuing investments and calculating return on investment.

In finance, we use calculus as a tool for measuring the sensitivity of certain variables to changes in other variables (e.g., how sensitive is the price of a bond to changes in interest rates).
In this section, we review methodologies for calculating the slope of a curve (the first derivative), and the rate of change of slope (the second derivative). We then discuss the importance of these measures for assessing the risk of various financial instruments.

This module re-familiarizes you with some general ideas and tools from algebra that are relevant to the financial markets. Participants begin with functions and formulas, and how these can be converted from algebraic statements into graphs and relationships between variables. There is an introduction to two specific functions: exponential and logarithmic functions, along with examples of their application for calculating rates of return. This section also covers some algebraic "tricks" that we use to simplify some of the math needed to price assets.

When individuals and institutions address their investing (lending) or financing (borrowing) needs, they are driven by two motivating factors: (1) to maximize return, and (2) to minimize risk. Statistical analysis is essentially a toolkit that enables us to evaluate properties of financial data series in order to estimate both risk and return, and thus make better financial decisions.
In this section, you will cover key definitions and techniques in the fields of probability and statistics, and learn (or be reminded) how we can apply these tools to analyze data and make intelligent predictions about possible future outcomes.