With this free course of 33 video lessons you will learn about the most important concepts of Financial Mathematics
Financial mathematics is the branch of mathematics that studies financial operations, which are those where money flows are exchanged that are placed at different times and that undergo quantitative variations over time.
What is the reason for this variation in the value of capital?
This is because capital (the sum of money lent in a financial transaction) gets over time an interest (which is the remuneration of the capital borrowed for its use over time).
Financial transaction means the replacement of one or more capital with another or other equivalents at different times of time, through the application of a financial law. Financial transactions are divided into simple (with only one capital at the beginning and one at the end of the transaction) comprising the study of interest and discount and complex transactions, so-called rents, involving payment flows, as is the case in the case of loan fees.
The financial law that is applied may be through a regime of simple interest where the interests generated in the past do not accrue and therefore do not, in turn, produce interest in the future. Interest is calculated on the original capital.
If you work under a composite capitalization regime, the interest generated in the past does accrue to the original capital and generate interest in the future (interest is capitalized). Depending on the meaning in which financial law applies, capitalization transactions exist: when a present capital is replaced by another future capital and update or discount capital: when future capital is replaced with another capital present.
Basically, financial mathematics studies study interest rates.1 Implicitly include studies of credits, investments, capitalizations and, in general, the development of financial transactions.2The interest rate is the relationship between the amount of money paid or received and the amount of money used, i.e. the relationship between profit and investment , displayed in terms of percentage.
Financial mathematics is a set of mathematical methods that allow you to determine the value of money over time