An Introduction to the Mathematics of Finance,
Edition 2 A Deterministic Approach
By Stephen Garrett

Publication Date: 19 Jun 2013
An Introduction to the Mathematics of Finance: A Deterministic Approach, Second edition, offers a highly illustrated introduction to mathematical finance, with a special emphasis on interest rates. This revision of the McCutcheon-Scott classic follows the core subjects covered by the first professional exam required of UK actuaries, the CT1 exam. It realigns the table of contents with the CT1 exam and includes sample questions from past exams of both The Actuarial Profession and the CFA Institute. With a wealth of solved problems and interesting applications, An Introduction to the Mathematics of Finance stands alone in its ability to address the needs of its primary target audience, the actuarial student.

Key Features

  • Closely follows the syllabus for the CT1 exam of The Institute and Faculty of Actuaries
  • Features new content and more examples
  • Online supplements available:
  • Includes past exam questions from The Institute and Faculty of Actuaries and the CFA Institute
About the author
By Stephen Garrett, Professor of Mathematical Sciences, University of Leicester, UK
Table of Contents
1. Introduction1.1 The Concept of Interest1.2 Simple Interest1.3 Compound Interest1.4 Some Practical IllustrationsSummary2. Theory of Interest Rates2.1 The Rate of Interest2.2 Nominal Rates of Interest2.3 Accumulation Factors2.4 The Force of Interest2.5 Present Values2.6 Present Values of Cash Flows2.7 Valuing Cash Flows2.8 Interest Income2.9 Capital Gains and Losses, and TaxationSummaryExercises3. The Basic Compound Interest Functions3.1 Interest Rate Quantities3.2 The Equation of Value3.3 Annuities-certain: Present Values and Accumulations3.4 Deferred Annuities3.5 Continuously Payable Annuities3.6 Varying Annuities3.7 Uncertain PaymentsSummaryExercises4. Further Compound Interest Functions4.1 Interest Payable pthly4.2 Annuities Payable pthly: Present Values and Accumulations4.3 Annuities Payable at Intervals of Time r, Where r > 14.4 Definition of for Non-integer Values of nSummaryExercises5. Loan Repayment Schedules5.1 The General Loan Schedule5.2 The Loan Schedule for a Level Annuity5.3 The Loan Schedule for a pthly Annuity5.4 Consumer Credit LegislationSummaryExercises6. Project Appraisal and Investment Performance6.1 Net Cash Flows6.2 Net Present Values and Yields6.3 The Comparison of Two Investment Projects6.4 Different Interest Rates for Lending and Borrowing6.5 Payback Periods6.6 The Effects of Inflation6.7 Measurement of Investment Fund PerformanceSummaryExercises7. The Valuation of Securities7.1 Fixed-Interest Securities7.2 Related Assets7.3 Prices and Yields7.4 Perpetuities7.5 Makeham’s Formula7.6 The Effect of the Term to Redemption on the Yield7.7 Optional Redemption Dates7.8 Valuation between Two Interest Dates: More Complicated Examples7.9 Real Returns and Index-linked StocksSummaryExercises8. Capital Gains Tax8.1 Valuing a Loan with Allowance for Capital Gains Tax8.2 Capital Gains Tax When the Redemption Price or the Rate of Tax Is Not Constant8.3 Finding the Yield When There Is Capital Gains Tax8.4 Optional Redemption Dates8.5 Offsetting Capital Losses Against Capital GainsSummaryExercises9. Term Structures and Immunization9.1 Spot and Forward Rates9.2 Theories of the Term Structure of Interest Rates9.3 The Discounted Mean Term of a Project9.4 Volatility9.5 The Volatility of Particular Fixed-interest Securities9.6 The Matching of Assets and Liabilities9.7 Redington’s Theory of Immunization9.8 Full ImmunizationSummaryExercises10. An Introduction to Derivative Pricing: Forwards and Futures10.1 Futures Contracts10.2 Margins and Clearinghouses10.3 Uses of Futures10.4 Forwards10.5 Arbitrage10.6 Calculating the Forward Price10.7 Calculating the Value of a Forward Contract Prior to Maturity10.8 Eliminating the Risk to the Short PositionSummaryExercises11. Further Derivatives: Swaps and Options11.1 Swaps11.2 Options11.3 Option Payoff and Profit11.4 An Introduction to European Option Pricing11.5 The Black–Scholes Model11.6 Trading Strategies Involving European OptionsSummaryExercises12. An Introduction to Stochastic Interest Rate Models12.1 Introductory Examples12.2 Independent Annual Rates of Return12.3 The Log-Normal Distribution12.4 Simulation Techniques12.5 Random Number Generation12.6 Dependent Annual Rates of Return12.7 An Introduction to the Application of Brownian MotionSummaryExercises
Book details
ISBN: 9780080982403
Page Count: 464
Retail Price : £54.99
Upper-division undergraduates and graduate students in the UK studying financial mathematics, Upper-division undergraduates and graduate students studying financial mathematics