Math 177

Theory of Interest and Applications

Winter Quarter 2020

Time and place: MWFr (lectures) and Th (discussion), 3pm- 3:50pm in MS 5200

Instructor: Professor Don Blasius

Office: MS 6145

Office hours: Wednesday 4-6 (may vary some weeks with hours in 4-6 interval on Fridays)

E-mail: blasius at math dot ucla dot edu

TA: Andrew Krieger

Office: MS 3969

Office Hours: Consult TA.

E-mail: akrieger at math dot ucla dot edu

Course Webpage: https://www.math.ucla.edu/~blasius/177W20.htm

Textbook: Samuel A. Broverman, Mathematics of Investment and Credit, 7th edition, Actex Publications, 2017.

Course Goals: Math 177 prepares students for the series of courses required for the Financial Actuarial Mathematics major. Students will learn foundational concepts of financial mathematics, especially those from the theory of interest rates. While the basic ideas are mathematically elementary, their applications can be complex. Math 177 is designed for students who seek a career in financial engineering, the actuarial field, banking, or the financial side of business, and more general can be useful for students who seek to improve their financial literacy in a quantitative way.

Grading: Homework is not graded but is assigned weekly. Grading is based on two midterms (17% each, total 34%), 5 quizzes (lowest dropped, 6% each for those counted, total 24%) and the final exam (42%).

Quizzes: last 20 minutes and are on Thursdays. The dates are Jan. 16, Jan. 30, Feb. 13, Feb. 27 and March 12. There are no make-up quizzes.

Midterms: Midterm 1 is Feb. 10 and Midterm 2 is March 9.

Final exam: 11:30-2:30, Monday March 16.

Note on exams: There are no make-up exams.

Prerequisites: Math 33A (115A is better), Math 170E (or A) or other probability.

Exam and other Practice Material: to be added.

Syllabus. See https://www.math.ucla.edu/ugrad/courses/math/177. We will mostly, but not exclusively, follow the syllabus. Readings for each week will be posted under Homework on the webpage and emailed to the class. See also https://www.soa.org/education/exam-req/edu-exam-fm-detail/ for further info about exam FM.

Homework assignments: (to be added as course progresses):

Lectures 1-4 Reading: 1.0-1.6, also SOA FM Study Note Determinants of Interest Rates available at

https://www.soa.org/globalassets/assets/Files/Edu/2017/fm-determinants-interest-rates.pdf

and https://www.soa.org/globalassets/assets/Files/Edu/2019/exam-fm-notation- terminology2.pdf

Do: 1.1.1, 1.1.3-6, 1.1.11-12, 1.2.2, 1.2.5, 1.2.7-8, 1.2.12, 1.2.15-18, 1.4.3-4, 1.4.10, 1.5.1-2, 1.5.4-5, 1.5.11-12. (Read other problems to be sure you could do them!)

Lectures 5-8: Reading: 2.1, 2.2 Do: 2.1.1-2, 2.1.4-6, 2.1.8-9, 2.1.11-13, 2.1.17, 2.1.20, 2.1.23-24, 2.1.27; 2.2.1, 2.2.4-7, 2.2.9, 2.2.12, 2.2.17, 2.2.19, 2.2.23, 2.2.25, 2.2.27.

Lectures 9-11: Reading: 2.3. Do: 2.3.1-2, 2.3.4-5, 2.3.8, 2.3.11-12, 2.3.18S, 2.3.23, 2.3.25, 2.3.31a, 2.3.36. Note we are not doing 2.4.

Lectures 12-14 (Week 5): Reading: 3.1, 3.2. Do: 3.1.1-2, 3.1.4-9, 3.1.11, 3.1.13, 3.2.1, 3.2.4, 3.2.7-8, 3.2.11, 3.2.13-17, 3.2.26, 3.2.29

Lectures 15-16 (Week 6): Reading: 4.1, 4.2. Do: 4.1.1-4, 4.1.6-7, 4.1.10 (optional), 4.1.11-12, 4.1.15, 4.1.18, 4.1.22, 4.2.1, 4.2.2, 4.2.4-5.

Lectures 17-18 (Week 7): Reading: 5.1, 5.2, 5.3; Do: 5.1.4-7, 5.1.9, 5.1.11, 5.2.1-4, 5.2.6, 5.3.2-3. Note: in 5.1.6, ignore hint for part a. Is it correct?

Lectures 19-21 (Week 8): Reading: Intro. to Chapter 6, 6.1, 6.2, 6.3; 6.4 is recommended. Do: 6.1.1-2, 6.1.3ab, 6.1.4-6, 6.3.1, 6.3.3-7.

Lectures 22-24 (Week 9): Reading 7.1, 7.2. Do 7.1.1-2, 7.1.5-6, 7.1.8, 7.1.12-14, 7.2.1, 7.2.3-7

Lectures 25-26 (Week 10): Reading 8.1-8.2.

Policies. Since MS 5200 is big, in exams and quizzes you must sit with empty chairs between you left to right and in columns. Suspected cheating will be reported to the office of the Dean of Students. The TI BAS Plus calculator can be used in exams and quizzes. Quizzes and exams are closed book. No notes are allowed.

Last Updated Feb.1, 2019.