The Fundamentals of Financial Mathematics – Level 2

Training Description

Behavioral Finance and Commercial Impact

This training program delves into advanced concepts of financial mathematics, enabling participants to analyze, model, and optimize financial decision-making in complex environments.

It explores advanced discounting and capitalization techniques, integrating continuous interest rates and financial arbitrage, while emphasizing the impact of time on cash flow valuation.

Additionally, the course introduces key probability distributions used in finance, such as the normal, uniform, Poisson, exponential, and Pareto distributions. These statistical tools are essential for modeling financial returns, assessing risk, and understanding extreme events in financial markets.

Through a combination of theoretical insights and practical case studies, participants will gain a deep understanding of how financial mathematics applies to corporate finance, portfolio management, and risk assessment.

Training Objectives

• Deepen the understanding of advanced concepts of time value of money and continuous interest rates.
• Master discounting and capitalization techniques using advanced mathematical models.
• Optimize corporate financing structures through debt analysis and cost of capital assessment.
• Evaluate investment projects under uncertainty by integrating real options and discount rate adjustments.
• Understand and apply factor models to estimate the cost of capital and asset profitability.
• Interpret and model financial risks using statistical tools such as variance, covariance, and Monte Carlo simulation.
• Analyze the term structure of interest rates and apply interest rate modeling frameworks such as Vasicek and Hull-White models.
• Apply duration and convexity concepts to effectively manage bond portfolios.
• Integrate advanced valuation methodologies for financial instruments and measure their sensitivity to market fluctuations.
• Leverage key probability distributions (normal, Poisson, Pareto, etc.) to model financial returns and risk events.

Target Audience

• Financial analysts seeking to enhance their skills in investment evaluation and risk modeling.
• Portfolio managers and risk managers aiming to integrate advanced tools for asset management and decision-making under uncertainty.
• Corporate and banking treasurers looking to optimize financing structures and cost of capital management.
• Financial engineers and quants wishing to master advanced interest rate modeling and financial instrument valuation techniques.
• Financial consultants specializing in financial analysis and structured finance products.
• Auditors and accountants involved in financial risk assessment and financing structure auditing.

Training Duration

• 2 days (14 hours)

Training Program

Fundamentals of Financial Mathematics – Level 2

I. Advanced Concepts of Time Value of Money

• Advanced discounting and capitalization techniques
• Continuous interest rates and discretization
• Arbitrage and risk-neutral pricing

Case Study:

Application of continuous interest rates to financial products

II. Financing Optimization and Debt Structuring

• Advanced amortization techniques
• Analysis of financing structures and impact of debt cost
• Evaluation and optimization of capital structure

Case Study:

Structured corporate financing analysis

III. In-Depth Analysis of Investments and Financial Decision-Making

• Comparison of investment projects under uncertainty
• Risk-adjusted discount rates
• Real options and investment flexibility

Quiz

IV. Advanced Cost of Capital and Profitability Management

• Detailed calculation of Weighted Average Cost of Capital (WACC)
• Link between capital structure and financial performance
• Factor models and risk premium considerations

Case Study:

Company valuation based on its cost of capital

V. Financial Risk Modeling and Applied Probabilities

• Return distributions and risk measurement
• Random walk models and Wiener processes
• Introduction to Monte Carlo simulations

Quiz

VI. Main Probability Distributions Used in Finance

• Classical distributions: normal distribution, uniform distribution
• Counting distributions: Poisson distribution
• Risk-related distributions: exponential distribution, Pareto distribution
• Applications in financial return modeling and extreme risk management

Case Study:

Simulation of distributions and their impact on risk management

VII. Advanced Interest Rates and Bond Instruments Management

• Term structure of interest rates and arbitrage
• Interest rate modeling with Vasicek and Hull-White models
• Calculation and management of sensitivities: duration and convexity

Case Study:

Analysis and management of a bond portfolio