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Mathematical Interest Theory

1 rating: 5.0

A book by Leslie Jane Federer Vaaler

This is an excellent book on interest theory, one of the four book recognized by the Society of Actuaries and Casualty Acruarial Society as a basis of study for the interest theory component of their joint FInancial Mathematics (FM) exam. What I particularly … see full wiki

Tags: Books, Mathematics, Risk Management, Interest Rate, Actuarial Science, Interest Rates

Author: Leslie Jane Federer Vaaler

Genre: Business & Investing

Publisher: Mathematical Association of America

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An excellent choice for a textbook in the mathematics of finance

Jun 25, 2010

by CharlesAshbacher
posted in Cafe Libri: Reviewing Books & More

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It would be interesting to know if the near financial collapse of late 2008, the subsequent public outrage and move to re-regulate the financial industry has led to an increase in the enrollment in courses in the mathematics of finance. The basic concept of human curiosity should drive an increased interest in how the financial industry works. This book will satisfy that curiosity.
Calculus is not used until the last chapter and then only slightly. The real mathematical prerequisite is the ability to engage and understand lengthy formulas, specifically those involving complex summations. Operationally, the formulas are executed using a Texas Instruments BA II Plus and there is an introductory chapter covering the basics of how to use one. Knowledge of the financial concepts of interest, annuities, loans, bonds, stocks, arbitrage and what drives changes in interest rates is also essential.
This book would be an excellent selection for a textbook in a course of the mathematics of finance. A large number of exercises appear at the end of the chapters and solutions t many of them appear in an appendix. The chapter headings are:

*) The growth of money
*) Equations of value and yield rates
*) Annuities
*) Annuities with different payment and conversion periods
*) Loan repayment
*) Bonds
*) Stocks and financial markets
*) Arbitrage, term structure of interest rates, and derivatives
*) Interest rate sensitivity

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