- Class Number 8098
- Term Code 2960
- Class Info
- Unit Value 6 units
- Mode of Delivery In Person
- Dr Le Chang
- Dr Le Chang
- Class Dates
- Class Start Date 22/07/2019
- Class End Date 25/10/2019
- Census Date 31/08/2019
- Last Date to Enrol 29/07/2019
Compound interest functions; valuation of annuities certain; loans repayable by instalments; comparison of value and yield of cash flow transactions; valuation of fixed interest securities, with and without tax on interest and capital gains; duration and volatility of securities; introduction to concept of immunisation and matching; consumer credit contracts; introduction to stochastic interest rate models.
Upon successful completion, students will have the knowledge and skills to:
- Define and describe in detail the use of cash flow models, simple and compound rates of interest and discount as well as compare and distinguish between nominal and effective rates of interest and discount.
- Describe in detail the various types of annuities and perpetuities and use them to solve financial transaction problems.
- Derive equations of value and various tools like linear interpolation & annuity tables.
- Communicate the difference in capital budgeting decision tools like Net Present Values, Internal Rates of Return and Discounted Payback Periods.
- Analyse in depth basic fixed interest financial transactions like Loan Valuation, Fixed Interest securities (eg. Bonds) and employ the skills developed in this course to evaluate such transactions. Incorporate the effects of taxation on such financial transactions.
- Explain the details of arbitrage and its use in the valuation of forward contracts. Employ term structure of interest rates to calculate forward and spot rates.
- Define interest rate risk in terms of duration and convexity of fixed interest products. Define immunisation and assess its use in mitigating interest rate risk.
This course covers the relevant parts of the Actuaries Institute syllabus, pertaining to subject CT1 (Financial Mathematics). Wherever possible the examples used in this course will reflect real world situations to emphasize the use of the techniques covered.
Examination Material or equipment
For the final exam, you will be provided with a HP Scientific Calculator 300s+.
Further information will be provided to students in lecture times and on Wattle.
All course notes and materials will be provided via Wattle. You will need access to a calculator to complete exercises required for this course. You will be provided with a calculator (HP Scientific Calculator 300s+) for final examinations.
You will need access to a computer to get the materials necessary for the course. We will use MS Excel in this course. Some in class work and tutorial questions and solutions will be illustrated using MS Excel. Learning guides and short video lectures will be made available on wattle for students to learn the application of the concepts taught in this course. Some assignment questions will require the use of MS Excel or a spreadsheet program.
Although there is no prescribed textbooks for this course, various supplementary material can enhance student learning.
Supplementary Reading (Not Compulsory)
Stephen Garrett (2013) An Introduction to the Mathematics of Finance, Second Edition, Butterworth-Heinemann. This book is available as an online textbook on the ANU Library page: Mathematics of Finance in ANU Library. You can download individual chapters for your personal use. Please ensure you follow the ANU guidelines on copyright issues.
The following supplementary readings may be interest if you have access to them (they are typically used for the equivalent professional association exam) but are not available on the ANU Library:
· Samuel A. Broverman (1996) Mathematics of Investment and Credit, Fifth Edition, Actex Publications, Inc.: Winsted, Connecticut. ISBN: 978-1566987677
· J.J. McCutcheon and W.F. Scott (1986) An Introduction to the Mathematics of Finance, published for the Institute of Actuaries and Faculty of Actuaries by Heinemann
· Formula and Tables for Actuarial Examinations, 2002, ACTED Australia
· Course Material for CT1: Financial Mathematics, ACTED Australia
Students will be given feedback in the following forms in this course:
- Following the Quiz 1 and 2, feedback may be given to the whole class about the general performance on the quiz.
- Students will also have the opportunity to speak with the tutors and the lecturer about their individual performance in the assignments.
ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.
As a further academic integrity control, students may be selected for a 15 minute individual oral examination of their written assessment submissions.
Any student identified, either during the current semester or in retrospect, as having used ghost writing services will be investigated under the University’s Academic Misconduct Rule.
Your final mark for the course will be based on the raw marks allocated for each of your assessment items. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed the scaled mark of that student) and may be either up or down.
Please see the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. For a more interactive guide on what this is all about, please see http://library.acadiau.ca/tutorials/plagiarism/.
Support for Students
The University offers a number of support services for students. Information on these is available online from http://students.anu.edu.au/studentlife/
Actuarial Profession Information
Exemption from Actuarial Professional examination
The Australian National University is accredited by the Actuaries Institute (IAAust) to provide students with exemptions from the Part I professional examinations of the Institute. Exemptions are recommended subject to obtaining sufficiently high grades in designated courses.
The standard required by the Actuaries Institute for an exemption will be upheld and thus no quota applies to the percentage of students receiving each grade in this course.
University subscription to the Institute of Actuaries
The Actuaries Institute allows students to become IAAust University Subscribers free of charge. Full time undergraduates studying at an accredited university who are members of a university student actuarial society are eligible. To sign up, go to: http://www.actuaries.asn.au/Membership/MembershipoftheInstitute/Subscriber.aspxThe University Subscriber offer is not a membership of the IAAust but a subscription to receive information on career opportunities, invitations to selected events, and online publications. You might also consider joining the IAAust – there are advantages in doing so while a full-time student. See: http://www.actuaries.asn.au/Membership/MembershipoftheInstitute.aspx
|Week/Session||Summary of Activities||Assessment|
|1||Cash-flow models. Simple and compound interest. Accumulated and present values.|
|2||Nominal and effective rates of interest and discount. Force of interest.|
|3||Introduction to annuities and their valuation.|
|4||Perpetuities. Continuous, increasing, decreasing and indexed annuities.||Quiz 1 Due|
|5||Equations of value. Introduction to linear interpolation and annuity tables. Dealing with inflation.|
|6||Loan valuation and payments. Capital budgeting including NPV, IRR and DPP.||Quiz 2 Due|
|7||Measuring investment performance. TWRR and MWRR.|
|8||Valuation of fixed interest securities, with and without tax on interest and capital gains.|
|9||Calculating yields. Allowing for callable features and inflation. Extending to property and share valuation.|
|10||Arbitrage and valuation of forward contracts. Yield curve and term structure of interest rates. Calculating forward and spot rates.|
|11||Interest rate risk: duration, effective duration and convexity. Conditions for and determination of immunisation.||Assignment Due|
|12||Immunisation exercises and revision|
Please see Wattle for tutors’ information. Tutorial signup for this course will be done via the Wattle website. Detailed information about signup times will be provided on Wattle. When tutorials are available for enrolment, follow these steps:
1. Log on to Wattle, and go to the course site.
2. Click on the link “Tutorial enrolment”
3. On the right of the screen, click on the tab “Become Member of ……” for the tutorial class you wish to enter.
4. Confirm your choice
If you need to change your enrolment, you will be able to do so by clicking on the tab “Leave group…” and then re-enrol in another group. You will not be able to enrol in groups that have reached their maximum number. Please note that enrolment in ISIS must be finalised for you to have access to Wattle.”
|Assessment task||Value||Due Date||Return of assessment||Learning Outcomes|
|Quiz 1||5 %||16/08/2019||23/08/2019||1|
|Quiz 2||5 %||30/08/2019||06/09/2019||2|
|Final Exam||70 %||31/10/2019||28/11/2019||1,2,3,4,5,6,7|
* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details
ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:
The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website. In rare cases where online submission using Turnitin software is not technically possible; or where not using Turnitin software has been justified by the Course Convener and approved by the Associate Dean (Education) on the basis of the teaching model being employed; students shall submit assessment online via ‘Wattle’ outside of Turnitin, or failing that in hard copy, or through a combination of submission methods as approved by the Associate Dean (Education). The submission method is detailed below.
Moderation of Assessment
Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.
Assessment Task 1
Learning Outcomes: 1
Quiz 1 will be provided (usually 1 week before the due date) on the course Wattle page. This quiz covers the material from the first two weeks of the course. Students are expected to complete this quiz individually. Students will get 45 minutes to complete this quiz. This quiz is worth 5% of your overall grade and is not redeemable. Under no circumstances will you be able to attempt the quiz outside of the allocated time period. Announcements will be made during lectures and on the Wattle course site regarding the availability of the quiz. The quiz solution and marks will be provided on Wattle page within a week after the due date. The overall performance of the quiz will be discussed in the lecture.
Due date: Friday 16th August 3:00pm (Week 4)
Assessment Task 2
Learning Outcomes: 2
Quiz 2 will be provided (usually 1 week before the due date) on the course Wattle page. This quiz covers the material from week three to week five of the course. Students are expected to complete this quiz individually. Students will get 60 minutes to complete this quiz. This quiz is worth 5% of your overall grade and is not redeemable. Under no circumstances will you be able to attempt the quiz outside of the allocated time period. Announcements will be made during lectures and on the Wattle course site regarding the availability of the quiz. The quiz solution and marks will be provided on Wattle page within a week after the due date. The overall performance of the quiz will be discussed in the lecture.
Due date: Friday 30th August 3:00pm (Week 6)
Assessment Task 3
Learning Outcomes: 1,2,3,4,5
Assignment questions will be provided to all students no less than two weeks before the due date on the course Wattle page. The assignment is designed to assess the students’ application of the various topics covered in this course, up to and including the material in week 9. Students are expected to complete this assignment individually. Completing this assignment will require the use of MS Excel. More details will be provided during the lectures and on Wattle.
Due date: Friday 18th October 3:00pm (Week 11)
Assessment Task 4
Learning Outcomes: 1,2,3,4,5,6,7
Centrally administered examinations through Examinations, Graduations & Prizes will be timetabled prior to the examination period. Please check ANU Timetabling for further information. Exam scripts will not be returned.
The final examination will be 3 hours long, closed book and will cover the entire syllabus. Specific details regarding examination conditions and the time and location for this examination will be provided on Wattle and in lectures once confirmed. You will be provided with a calculator (HP Scientific Calculator 300s+) for this exam. Only calculators provided by the Examinations Office on the day of the exam are permitted in the exam room.
Date: Specific date to be advised.
Academic integrity is a core part of the ANU culture as a community of scholars. At its heart, academic integrity is about behaving ethically, committing to honest and responsible scholarly practice and upholding these values with respect and fairness.
The ANU commits to assisting all members of our community to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. The ANU expects staff and students to be familiar with the academic integrity principle and Academic Misconduct Rule, uphold high standards of academic integrity and act ethically and honestly, to ensure the quality and value of the qualification that you will graduate with.
The Academic Misconduct Rule is in place to promote academic integrity and manage academic misconduct. Very minor breaches of the academic integrity principle may result in a reduction of marks of up to 10% of the total marks available for the assessment. The ANU offers a number of online and in person services to assist students with their assignments, examinations, and other learning activities. Visit the Academic Skills website for more information about academic integrity, your responsibilities and for assistance with your assignments, writing skills and study.
This course may not require the students to use Turnitin for the assignment submission. The assignment is to be submitted online on Wattle at the pre-specified location. You must attach an Assignment Cover Sheet. Please keep a copy of tasks completed for your records.
For some forms of assessment (hand written assignments, art works, laboratory notes, etc.) hard copy submission is appropriate when approved by the Associate Dean (Education). Hard copy submissions must utilise the Assignment Cover Sheet. Please keep a copy of tasks completed for your records.
No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded.
Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.
Assignments will be returned as soon as they are marked, in your tutorial classes or lectures, or you will be able to collect them from the School Office on level 4 of the CBE building.
Extensions and Penalties
Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. The Course Convener may grant extensions for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.
Resubmission of Assignments
Students will not be permitted to resubmit assignments.
Distribution of grades policy
Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.
Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.
Support for students
The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).
- ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
- ANU Diversity and inclusion for students with a disability or ongoing or chronic illness
- ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
- ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
- ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
- ANUSA supports and represents undergraduate and ANU College students
- PARSA supports and represents postgraduate and research students
Model selection, robust statistics, high-dimensional data analysis, lasso, PCA, spatio-temporal.
Dr Le Chang