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Seminar on financial mathematics

Seminar on financial mathematics - Mathematics in Finance...

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Mathematics in Finance Introduction to financial markets
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What to do with money? spend it car gifts holiday ... invest it savings book bonds shares derivatives real estate ...
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I Savings book Lending K€, getting K(1+r)€ after a year bank hopes to earn a higher return on K than r (for example by lending it) practically no risk
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Risk free interest rate r can be obtained by investing with no risk USA: often interest which the government pays Europe: EURIBOR (European Interbank Offered Rate) positive. discount factor 100 today 100(1+r) in one year 100 in one year 100/(1+r) today
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II Bonds An IOU from a government or company. In exchange for lending them money they issue a bond that promises to pay you back in the future plus interest. (IOU = investor owned utilities) Fixed-interest bonds Floating bonds Zero bonds
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III Shares Certificate representing one unit of ownership in a company.
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