Teaching of financial mathematics using Maple

Roman HAŠEK, Vladimíra PETRÁŠKOVA

University of South Bohemia in České Budějovice, Pedagogical FacultyThe Czech Republic

Aim of the contribution

To present first results of our project

“Multimedia tool for teaching of financial mathematics”

Motivation

To help our students to understand the core of basic To help our students to understand the core of basic

concepts of financial mathematics and to be in touch concepts of financial mathematics and to be in touch

with the newest financial products.with the newest financial products.

Financial mathematics at our university

1) Special Bc. studying program “Financial mathematics” 1) Special Bc. studying program “Financial mathematics” which prepares students to work in financial branch.which prepares students to work in financial branch.

2) Studying program “Teaching of mathematics at grammar and2) Studying program “Teaching of mathematics at grammar and secondary school” secondary school” (In the Czech Republic financial mathematics is included in(In the Czech Republic financial mathematics is included in curricula of both grammar and secondary schools. Like ancurricula of both grammar and secondary schools. Like an up toup to date application of arithmetic and geometric date application of arithmetic and geometric progression).progression).

Basic concepts

- Simple interest, compound interest, efficient interest rate

- Savings

- Credits: Mortgage credit, consumer lending, credit card

- Notes

- Bonds, Stocks

Our experience:Our experience:Most of these concepts of financial mathematics are difficult Most of these concepts of financial mathematics are difficult to understand for students.to understand for students.

Our experience with teaching of FMOur experience with teaching of FM

Our decision

To prepare a tool which enables students deeper insight intothe basic concepts of FM.

Demands:

- interactivity

- topicality

- openness

Solution: Interactive web page (http// www.pf.jcu.cz/~fim) with examples solved in Maple. Each of examples is (will be) accompanied with links to corresponding Maple document, Maplet and a file with the Maple code of solution.

Use of the Maple software

Advantages

- point and click mathematics enables to do own experiments

without familiarity with syntax

- Maplets focused on particular quality

- Numerical solution of more complicated tasks

- our university has the multiple licence of Maple

Disadvantages

-Maplets run only on a computer with the Maple instalation

Example – Bonds

Selection of tasks should respect the next rule:“We should not use the Maple software to routine computing.We expect some benefits in deeper understanding the subject.”

EXAMPLE: The bond with maturity term 10 years, face value 1000 EUR and coupon rate 10% was purchased for the price of 900 EUR. - Calculate duration of this bond.

- Estimate a change in the bond price corresponding with an increase in redemption yield until maturity of bond by 3%.