FINANCIAL MATHEMATICS AND APPLICATIONS: An Introduction To Asset Liability Management

This book provides a fundamental understanding of financial mathematics and its applications. The book covers values of general cash flows and fixed-income instruments including loans and bonds. Basic asset liability management strategies are introduced focusing on duration matching which is critical in the financial services industry for earnings and capital management. Three key questions studied are: 

1) How are balances, values, and prices calculated? 

2) How do income and values change? 

3) How do we manage risks associated with changes? 

The book immerses readers in practicing building and applying deterministic discrete cash flow models with various time steps in contexts with specific cash flows using scores of Microsoft Excel spreadsheet examples and exercises. Projects include time-lapse videos of interest rates, lab experiments exploring key questions 2) and 3), and validating Bloomberg’s Yield and Spread Analysis screen values.