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Review of utility
functions. Investor’s expected utility of investment. Measures of
risk of investment: variance, semi-variance, shortfall probability
and mean shortfall. The mean and variance of return on a portfolio
of assets. Single factor and multi-factor models. Capital asset
pricing model and arbitrage pricing model. Efficient market
hypotheses.
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Main textbooks: |
J. McCutcheon, W.
Scott,
An Introduction
to the Mathematics
of Finance,
Heinemann, 1986.
W. Paul, Jörg
Baschna,
Stochastic Processes:
From
Physics
to Finance,
Springer. |
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Auxiliary
textbook: |
N. Bowers, H.
Gerber, J. Hickman, D. Jones, C. Nesbitt,
Actuarial Mathematics,
2nd ed. Society of Actuaries, 1997. |
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