- Basics of interest modelling (Bonds and linear products, swaps, caps and floors, bond options, rate of interest options, interest rate term structure curve, interest rates (short rates and forward rates)),
- Heath–Jarrow–Morton framework (simple example: Ho-Lee model, general HJM drift condition, one- and multidimensional modelling),
- Short rate models (general one factor-modelling, term structure equation, affine modelling of interest rate structure, Vasicek-, Cox-Ingersoll-Ross- and further models, option pricing model, model calibration),
- Defaultable bonds (Merton model).
Interest Rate Theory (M, 4.5 LP)
|Module Number||Module Name||CP (Effort)|
|MAT-61-12-M-7||Interest Rate Theory||4.5 CP (135 h)|
|CP, Effort||4.5 CP = 135 h|
|Position of the semester||1 Sem. in WiSe|
|Level|| Master (Advanced)|
Lecturers of the department Mathematics
|Area of study||[MAT-STO] Stochastics/Statistics/Financial Mathematics|
|Reference course of study||[MAT-88.105-SG] M.Sc. Mathematics|
|Type/SWS||Course Number||Title||Choice in |
|SL||SL is |
required for exa.
Interest Rate Theory
|P||28 h||107 h||-||-||PL1||4.5||WiSe|
- About [MAT-61-12-K-7]: Title: "Interest Rate Theory"; Presence-Time: 28 h; Self-Study: 107 h
Examination achievement PL1
- Form of examination: oral examination (20-30 Min.)
- Examination number: 86211 ("Interest Rate Theory")
Evaluation of grades
The grade of the module examination is also the module grade.
Competencies / intended learning achievements
The students gained a precise and independent handling of terms, propositions and methods of the lecture. They understand the proofs presented in the lecture and are able to reproduce and explain them. They can in particular outline the conditions and assumptions that are necessary for the validity of the statements and how these are to be interpreted in the context of actuarial and financial mathematics.
- T. Björk: Arbitrage Theory in Continuous Time,
- D. Brigo, F. Mercurio: Interest Rate Models – Theory and Practice,
- N. Branger, C. Schlag: Zinsderivate – Modelle und Bewertung.
Requirements for attendance (informal)
- [MAT-10-1-M-2] Fundamentals of Mathematics (M, 28.0 LP)
- [MAT-60-11-M-4] Probability Theory (M, 9.0 LP)
- [MAT-61-11-M-7] Financial Mathematics (M, 9.0 LP)