Calculus

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.

By the end of this module you will be able to:

• Understand calculus
• Calculate first and second derivatives
• Use calculus to asses risk