AMS 420, investment science foundations

Catalog Description: Course focuses on fundamental principles of financial engineering and investment science such as cash flow streams, arbitrage, risk aversion, pricing of finance instruments, interest rate term structure, fixed income instruments duration, bond portfolio immunization, Markowitz mean-variance portfolio theory, Capital Asset Pricing Model and fixed proportion investment strategy.

Prerequisite:  Grade of B+ or higher in AMS 311 
Advisory Prerequisite:  AMS 341

3 credits

Required Textbook for Summer and Fall 2023:
"Investment Science" by David G. Luenberger, Oxford University Press (either edition below is acceptable):

1st edition:  978-0195108095 (July 3, 1997)

2nd edition:  978-0199740086 (June 24, 2013)

 

THIS COURSE IS TAUGHT IN THE  SUMMER SESSION AND FALL SEMESTER STARTING 2023

Topics

Week 1. Introduction to the course
Week 2. The basic theory of interest
Week 3. Fixed-income securities
Week 4. The term structure of interest rates
Week 5. Applied interest rate analysis
Week 6. Mean-variance portfolio theory
Week 7. The capital asset pricing model
Week 8. Models and data (factor models, CAPM)
Week 9. General principles (utility function, risk aversion)
Week 10. Lattice models of price dynamics
Week 11. Finite difference models (additive models, multiplicative models)
Week 12. Investment wheel
Week 13. Fixed proportion strategy
Week 14. Log utility approach to grows

Learning Outcomes for AMS 420 Investiment Science Foundations

Learning Objectives: Learn basic principles and concepts of financial mathematics. Develop
necessary skills to evaluate time value of money, investment alternatives and risk/return
characteristics of investments. Acquire analytical and financial techniques for justification of
investment decisions.