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Financial Mathematics


Financial MathematicsFinancial Mathematics has become an important area of academic pursuit in that it attempts to abstract out the essential properties of investment objects and the risk management behavior of individuals and firms, and to pursue the implications of those properties to explaining the large-scale behavior of markets. More than this, knowledge of the ideas and results, and mastery of the ways of thinking of this subject is of exceptional value for the future financial life of the student who studies it.

Financial mathematics explores the mathematics of investment, such as the debt-equity balance of firms, the selection of optimal investment portfolios, and the valuation of derivatives such as call options on stocks. It also focuses on the properties of investment objects, investors' and firms' attitudes toward risk, and the consequences to individual investor behavior as well as that of the whole market. It is a subject of much current interest, both theoretical and practical, which combines mathematical reasoning with economic insights.

The Program
Knox College offers a major in Financial Mathematics as a special program of the Department of Mathematics. Requirements for the major include 11.5 credits including a combination of courses in calculus, linear algebra, mathematical statistics, economics and elective courses. A core 200-level Financial Mathematics course grounds the student in the theory of interest and also examines the
valuation of assets traded on financial markets, such as stocks, bonds, futures, and options. An advanced 300-level course continues at a higher level the study of portfolios of assets in finite markets and the valuation of derivative assets. As a "capstone" experience, majors are required to participate in the independent study of a topic of current interest and produce a talk on the topic. Some majors undertake a college honors project, which involves a year of research on a topic in Financial Mathematics, a paper and an oral defense. Students have the benefit of small classes, courses that include research opportunities, access to numerous off-campus programs, and professors who are both scholars and teachers.

The mathematics department maintains a powerful server that gives optimal performance for large numbers of simultaneous network users of the Mathematica symbolic algebra, graphical, and programming package. Mathematica is used heavily in Financial Mathematics courses to do computations and simulations and to produce publication quality technical documents. The Stellyes and Caterpillar Labs provide PCs in the Umbeck Science-Mathematics Center that are frequently used for class activities. Additional facilities include several science-related computer labs, a data analysis lab in George Davis Hall, and a 24 x 7 general computer lab in Seymour Union.

The Department of Mathematics is housed in the Umbeck Science-Mathematics Center. Its Kresge Science-Mathematics Library holds relevant reference works and journals. Knox has superb computing facilities for student use. Knox's high-speed fiber optic network gives students anywhere on campus, including their own rooms, free DS-3 access to the Internet and to advanced software, such as Mathematica and statistical software.

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