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Course Code    : AMAT 41403

Title                   : Financial Mathematics

Pre-requisites   : PMAT 21272

Learning outcomes:

On successfully completion of the course the student will be able to

• define time value of money
• calculate present and future values of annuities and cash flows
• construct an investment portfolio to match present value and duration of a set of liability cash flows
• define basic types of financial derivatives
• evaluate the payoff and profit of basic derivative contracts
• apply put-call parity to identify arbitrage opportunities
• calculate the option price on various underlying assets using Binomial tree method
• solve Black-Scholes equation numerically
• define appropriate Swap strategies.

Course Content:

Time Value of Money: simple, compound Interest, comparing simple and compound interest, , accumulation
function, future value, current value, present value, net present value, discounting discount factor, rate of discount,
interest payable monthly, quarterly, etc., nominal rate, effective rate, inflation and real rate of interest, force of
interest, equation of value.

Annuities/cash flows: Annuity-immediate, annuity due, perpetuity, payable monthly or payable continuously,
level payment annuity, arithmetic increasing/decreasing annuity, geometric increasing/decreasing annuity, term of
annuity.

Loans: Principal, interest, term of loan, outstanding balance, final payment (drop payment, balloon payment),
amortization, sinking fund.

Basic terms in Financial Markets: derivative, underlying asset, over the counter market, short selling, short
position, long position, ask price, bid price, bid-ask spread, lease rate, stock index, spot price, net profit, payoff,
credit risk, dividends, margin, maintenance margin, margin call, mark to market, no-arbitrage, risk-averse, type of
traders.

Options: call option, put option, expiration, expiration date, strike price/exercise price, European option, American
option, Bermudan option, option writer, in-the-money, at-the-money, out-of-the-money, covered call, naked
writing, properties of stock options, factors affecting option prices, assumptions and notations, put-call parity.

Forwards and Futures: forward contract, futures contract, outright purchase, fully leveraged purchase, prepaid
forward contract, synthetic forwards, cost of carry, implied repo-rate.

Option Pricing using Binomial Trees: A one-step binomial model and a no-arbitrage argument, Risk-neutral
valuation, Two-step binomial trees, Put and Call options, American options, Delta, Matching volatility with u and
d, binomial tree formulas, increasing the number of steps, create spreadsheet application

The Black-Scholes Formula: Brownian motion, martingales, stochastic calculus, Ito processes, stochastic models
of security prices, Black-Scholes Merton Model, Black-Scholes Pricing formula on call and put options, Applying
formula to other assets.

Swaps: swap, swap term, prepaid swap, notional amount, swap spread, deferred swap, simple commodity swap,
interest rate swap

 Assessment: A combination of lectures, tutorial discussions and presentations

 Recommended Readings:

1. Kellison, S. (3rd Ed., 2008). The Theory of Interest, McGraw-Hill/Irwin.
2. Hull, J.C. (10th Ed., 2018). Options, Futures and Other Derivatives, Pearson.
3. McDonald, R.L. (3rd Ed., 2013). Derivatives Markets, Addison Wesley.
4. Kosowski, R. & Neftci, S.N. (3rd Ed., 2015). Principles of Financial Engineering, Academic Press.

User Rating: 5 / 5

Course Unit Code     : AMAT 42383 

Course Title               : Advanced Mathematical Modeling

Pre-requisites             : AMAT 41363

Learning outcomes:

Upon successful completion of the course unit the student will be able to:

• explain how the general principles arise in the context of mathematical modeling
• analyze existing mathematical models using ordinary differential equations
• formulate simple ODE models for real world problems
• solve system of ordinary differential equations
• analyze the qualitative behavior of mathematical models
• identify the solutions of difference equations
• Solve system of linear difference equations using Putzer algorithm and Jordan form.
• demonstrate biological applications of difference equations.

 Course Content:

Introduction to Modeling: Philosophy of modeling, Modeling Methodology, Problem formulation, Mathematical Description, Analysis, Interpretation.

Mathematical Modeling Using Ordinary Differential Equations: Classification of ODE, Equilibrium points, First order Differential Equations: Mixing, chemical reactions, Population models: Logistic growth model, Harvesting models, Traffic Dynamic models: Microscopic and macroscopic models, System of Differential equations: Interacting population models (Predator –Prey models, Competition models), Compartment models (Dynamic of infectious disease, Age structured models, Reaction kinetics), Qualitative analysis of models.

Mathematical Modeling Using Difference Equations: First order difference equations, Equilibrium points, asymptotic stability of equilibrium points, System of linear difference equations: Autonomous systems, Discrete analogue of Putzer algorithm, Jordan form, linear periodic systems, Biological Applications of Difference Equations: Markov chains, Population dynamics, Trade models, Age classes, Business cycle models.

Group Project: Mathematical model formulation for a real world problem

 Method of teaching and learning    : A combination of lectures and tutorial discussions

 Assessment                 :  Based on Assignments, Group project presentations, Reports and Final Exam.

 Recommended Textbook:

1. Kapur, J.N. (2015). Mathematical Modeling, New Age International.

2. Bender, A. (2012). An introduction to Mathematical Modeling, Courier Corporation.

3. Haberman, R. (1998). Mathematical Models: Mechanical Vibrations, Population Dynamics, and Traffic Flow, SIAM.

4. Allen, L. (2006). An Introduction to Mathematical Biology, Pearson.

5. Elaydi, S. (2005). An Introduction to Difference Equation, Springer.

6. Illner, R., Bohun, C.S., McCollum, S. & Roode, T.V. (2005). Mathematical Modelling: A Case Studies Approach, AMS.

User Rating: 5 / 5

Course Code  :           AMAT 42393

Title                :           Fluid Dynamics

Pre-requisites :           PMAT 41343

Learning Outcomes:

At the end of this course the student will

• Identify fluid flow motions and their properties
• formulate equations of motions based on three conservation laws
• simplify equations of motions considering flow characteristics and apply them in real world problems
• identify appropriate boundary conditions
• make use of complex analysis for two-dimensional fluid motions
• distinguish the dominant terms through dimensional analysis
• Analyze and interpret the 3D flow problems.

 Course Content:

Vector Analysis Review: Orthogonal curvilinear coordinates, Gradient, Divergence and curl.

Basic Principles of Fluid Dynamics: Fluids and fluid flow variables, Stream lines and path lines, Lagrangian and Euler approaches for describing fluid motions, Reynold’s Transport Theorem, conservation of mass (equation of continuity), momentum and energy

Newtonian fluid: Inviscid and viscous fluids, Euler’s equation of Motion, Vorticity, irrotational motion under conservative forces, Bernoulli’s equation

Boundary condition: Inlet and outlet conditions, no slip condition, pressure boundary conditions, radial and axisymmetric boundary conditions.

Flow in Pipes: Laminar flow in pipes, Pressure drop and head loss, flows in non-circular and inclined pipes.

Two-Dimensional Motion: Stream function and plotting stream lines, Complex potential, Sources and sinks, Vortices, Doublets and image systems, Milne-Thompson theorem.

Axi-symmetric Motion: Stokes’ stream function in three dimensional flows.

Three-Dimensional Motion: Irrotational motion, Laplace’s Equation, Spherical Harmonics, Flow of a stream past a fixed sphere, Motion of a sphere in a fluid, Impulsive motion.

Dimensional Analysis and modeling: Nondimensionalization of equations

 Method of Teaching and Learning :  A combination of lectures, classroom discussions and group projects.

 Assessment     :  Based on tutorials, tests, presentations and end of course Examination.

 Recommended Reading       :

1. Ruban, A.I. & Gajjar, J.S.B. (1 st Ed., 2014). Fluid Dynamics (classical fluid dynamics), Oxford.
2. Cengel, Y.A. & Cimbala, J.M. (2006). Fluid Mechanics (Fundamentals and Applications), McGraw Hill.
3. Feistauer, M. (1993). Mathematical Methods in Fluid Dynamics, Chapman and Hall/CRC.
4. Chorin, A.J. & Marsden, J.E. (2012). A Mathematical Introduction to Fluid Mechanics, Springer Science & Business Media.
5. Henningson, D.H. & Berggren, B. (2005). Fluid Dynamics Theory and Computation, Stockholm.
6. Chorlton, F. (2005). Textbook of Fluid Dynamics, CBS Publishers & Distributors

User Rating: 5 / 5

Course Unit Code     : AMAT 41373

Course Title               : Advanced Computational Mathematics

Pre-requisites             : AMAT 22292

 Learning outcomes:

Upon successful completion of the course unit the student will be able to:

• calculate finite difference operators to approximate the derivatives and corresponding truncation errors
• identify initial and boundary conditions of PDE
• apply finite difference methods to obtain the approximate solution of PDEs together with prescribed boundary and/or initial conditions
• analyze the stability, consistency and convergence of numerical scheme
• compare the accuracy of the approximate solution obtained by finite difference scheme with exact solution using simulation results
• solve boundary value problems using basic finite element methods
• solve one dimensional PDEs using finite element methods
• solve boundary value problems using free FEM++.

 Course Content:

Finite Difference Methods: Introduction, Classification of Partial Differential Equations (PDE): parabolic, hyperbolic and elliptic, Taylor series expansion: analysis of truncation error. Initial and boundary conditions: Dirichlet and Neumann boundary conditions. Finite difference methods: Forward, Backward, Centered and Crank-Nicholson schemes, Implicit and Explicit methods. Stability and Convergence analysis of numerical schemes: Von Neumann Analysis, Consistency and Stability, Lax Equivalent Theorem, Comparison of Numerical Schemes.

Finite Element Methods: Introduction, Weak Formulation. Solving one and two dimensional PDEs using finite element method: Weighted residual methods: Collocation method, least square method, Galerkin method.

Practical: Implement Finite Difference Schemes using appropriate software, Implement Finite element method using Free FEM++

 Method of Teaching and Learning : A combination of lectures and tutorial discussions

 Assessment     :           Based on tutorials, presentation, tests and end of course examination

 Recommended Textbook:

1. Burden, R.L., Faires, J.D, Burden, M.L. (10th Ed., 2016). Numerical Analysis, Cengage Learning.
2. Smith, G.D. (3rd Ed., 1986). Numerical Solution of Partial Differential Equations: Finite Difference Methods, Clarendon press.
3. Evans, J., Blackledge, J. & Yardley, P. (2000). Numerical Methods for Partial Differential Equation, Springer.
4. Davies, A.J. (2nd Ed., 2011). Finite Element Method: An Introduction to Partial Differential Equations, OUP Oxford.
5. Desai, Y.M. (2011). Finite Element Method with Applications in Engineering, Pearson Education India.
6. Ŝolín, P. (2013). Partial Differential Equations and the Finite Element Method, Wiley.