CFRM 540: Investment Science I

Course Description:

This course will introduce students entering into the CF&RM MS degree and certificate programs to the fundamentals of financial derivatives. Topics will include the basics of interest rates and present value calculations, term structure of interest rates, the concepts of financial arbitrage, the pricing of futures, forwards, and call/put options, and the binomial lattice.

Learning Objectives:

Upon successful completion of the course the student will be able to:

  1. Convert between different interest rate compounding conventions
  2. Price the current value of future cash flows and compute discount factors
  3. Understand the term structure of interest rates
  4. Understand the pricing of forwards and futures and the use of futures for hedging risk
  5. Understand how to use no-arbitrage arguments to value options and financial derivatives contracts
  6. Write computer programs to compute implied volatility and price an option contract using a binomial lattice
Steven Golbeck
There will be no required textbook
Programming in the R computing environment
Mathematics, probability/statistics, and R programming at the level of CFRM 460, 461, 463. Familiarity with material from ECON 424/CFRM 462, Introduction to Computational Finance and Financial Econometrics, is recommended. Available for free on; see the materials at: