Financial Mathematics for trading

Financial Mathematics for trading

    Course context

Since 2007, the successive financial crises have pushed certain terms into the economic spotlight, which until then had been reserved for specialists on trading platforms: Credit Default Swaps, short sales, risk cover, volatility, Value-at-Risk, sovereign obligations, etc.  This field of highly specialized mathematics allows students in the trading course to shine thanks to this knowledge. The study of stochastic mathematics, for example, gives students access to prestigious positions.

    Contenu du module

This course is an initiation into mathematic models that are at the base of these concepts and several others. The course designers deliver an in-depth analysis of these models and their founding principles.   They lead critical discussions on the use of these models in the identification of investment strategies, asset evaluation and risk management associated with market activity.  Large sections of financial mathematics will be approached in a detailed manner according to their usefulness in the CIT’s trading program.  We begin with stochastic mathematics, which lays the foundation for students wishing to continue in this prestigious discipline to seek acceptance into a renowned masters program to become quants, in the example of the mathematics master Nicole El Karoui.  Generally speaking, students at the CIT who wish to launch their educational career in financial mathematics will find that the school offers sufficient training in the fundamental basics, complimented by a concrete experience in trading. This will be very useful to the continuation of their education into a master’s or doctorate program.

This course invites the student to dive into the heart of a fascinating discipline, which is widely controversial and regularly at the front page of financial news.

Course outline

  • Introduction
  • Review of the basics of temporal series
  • Presentation of structural VARs
    • Reduced form and structural form
    • Long term and short term restrictions
  • Anticipating changes in Macroeconomics
    • Adaptive anticipation
    • Rational anticipation
    • Application: Hyperinflation model
  • The topic of nominal rigidities in the context of rational anticipation
    • Justifying price and wage rigidity
    • Model of rigidity for nominal wages
  • Models of frictionless cycles: RBC
    • Presentation of the canonic model
    • Do these models explain cycle dynamics?
  • Models of imperfect competition and price rigidity
    • Debate on the impact of technological shocks on the job market
    • New Keynesian models
    • Empirical implications
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A unique learning experience combining theorical finance and trading courses with the opportunity to apply that knowledge in real a market room.

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