This subject provides a grounding in financial mathematics and its simple applications.

Financial mathematics is interesting because it synthesizes a highly technical and abstract branch of maths, measure theoretic probability, with practical applications that affect peoples’ everyday lives. Financial mathematics is exciting because, by employing advanced mathematics, we are developing the theoretical foundations of finance and economics. To appreciate the impact of this work, we need to realise that much of modern financial theory, including Nobel prize winning work, is based on assumptions that are imposed, not because they reflect observed phenomena but because they enable mathematical tractability. Just as physics has motivated new maths, financial mathematicians are now developing new maths to model observed economic, rather than physical, phenomena. Financial innovation currently has a poor reputation and some might feel that mathematicians should think twice before becoming involved with "filthy lucre". However, Aristotle tells us that Thales, the father of western science, became rich by applying his scientific knowledge to speculation, Galileo left the University of Padua to work for Cosimo II de Medici, and wrote On the discoveries of dice, becoming the first quant. Around a hundred years after Galileo left Padua, Sir Isaac Newton, left Cambridge to become warden of the Royal Mint, and lost the modern equivalent of £3,000,000 in the South Sea Bubble. Personally, what was good enough for Newton is good enough for me. Moreover, interesting things happen when maths meets finance: the concept of probability emerged out of the interface. And looking at the 23 DARPA Challenges for mathematics, several of these — the mathematics of the brain, the dynamics of networks and capturing and harnessing stochasticity in nature, beyond convex optimization — are all highly relevant to finance.

Financial mathematics needs to tell not only what people ought to do, but also what people actually do. This gives rise to a whole new horizon for mathematical finance research: can we model and analyse ... the consistency and predictability in human flaws so that such flaws can be explained, avoided or even exploited for profit?.

This subject provides a basic understanding of corporate finance, including a knowledge of the instruments used by companies to raise finance and manage financial risk and to provide the ability to interpret the accounts and financial statements of companies and financial instituitions.

This subject provides a grounding in the aspects of statistics and, in particular, statistical modelling that are of relevance to actuarial work.

This subject provides a grounding in stochastic processes and survival models and their application.

This is looked at both from the point of view of individuals and their requirements for financial security, and from the point of view of financial institutions and their ability to provide products that meet customer needs. It will also provide a sufficient understanding of macroeconomics to enable the future actuary to interpret the economic environment and to make informed judgements as to suitable assumptions to make regarding future inflation, returns on investment, stock market behaviour, exchange rates and economic growth.