Introduction to Financial Assets

What is the course about?

This course is an introduction to financial assets for the complete beginner. By this we mean those that are traded on markets such as exchanges – things like shares, bonds, options and futures. The course is intended, for example, to provide a good grounding for someone starting a new job in the City without previous experience in the financial industry.

The course focuses on how each asset works and how its behaviour can be modelled mathematically. In some cases (such as bonds) this is rather straightforward and we will show the calculations in full. In others (such as options), very sophisticated techniques are required and we will aim to show the general idea. In the case of more recent arrivals such as cryptocurrencies, no consensus model is yet available.

To get the most out of the course you should be comfortable with seeing algebraic manipulations involving things like powers, square roots and multiplying out brackets. You won’t be required to carry out any calculations on your own and anything beyond GCSE maths will be explained as we go along. Our intention is to show how mathematical models make the assets easier to understand, but also reflect the assumptions and interests of the traders who use them.

Note that this is a theory-based course that doesn’t offer investment advice. We don’t cover topics such as property, insurance, company accounts, physical commodities or regulatory frameworks. However, this course should provide you with useful techniques for thinking about these and many more besides.

What will we cover?

• What are financial markets and assets?
• The time value of money and compound interest
• Bonds, bond pricing and yields
• Forwards and future
• The use of volatility and drift to model stock prices
• The ideas behind the standard approach to option pricing (without mathematical technicalities)
• A high-level introduction to credit derivatives
• Emerging thinking on the subject of cryptocurrencies
• Different kinds of financial risk and how they can be managed
• Standard assumptions that underlie most financial modelling.

What will I achieve?
By the end of this course you should be able to...

• Describe the most commonly-used financial assets – how they work, what function they perform and how professionals assess their value
• Use a range of financial jargon correctly
• Interpret a yield curve
• Apply discounting to future-dated cashflows
• Model the price of an asset that has both deterministic and stochastic components
• Break down and manage different kinds of financial risk
• Set out the main assumptions used in financial modelling, why they’re needed and in what ways they aren’t entirely true in practice.

What level is the course and do I need any particular skills?

English language skills: good reading comprehension, enough spoken language ability to participate in class discussions.

The mathematical content of the course assumes algebra skills at the level of a UK GCSE. As an example (not a financial one), suppose x > 0 and find its value when 2x(x-3) = 0.

How will I be taught, and will there be any work outside the class?

This course works by giving you material to read outside class and then using the class time for discussion of the trickier points, working through examples and so on. You’re not expected to understand everything in the reading but you’ll get a lot more out of the course if you can set aside an hour to look through it each week.

Are there any other costs? Is there anything I need to bring?

No, all resources will be provided digitally.

When I've finished, what course can I do next?

Please click here to view our Programming and Maths courses.